Argentina raises rate to 60%
BUENOSAIRES•Argentina’s currency crisis deepened on Thursday as an emergency interest-rate increase to 60 per cent failed to stop jittery investors from pulling their money out of the country.
The currency extended losses after the bank raised its benchmark measure to a global high. The hike, the second this month, was the latest attempt by policymakers to defend a currency that’s lost more than half its value this year. A day earlier, President Mauricio Macri shocked the nation with an appeal for quicker payouts from the International Monetary Fund, which said it’s considering the request.
The peso was down about 12 per cent against the dollar at 3:05 p.m. in Buenos Aires, after a daily decline that at one point approached 20 per cent. It’s the steepest loss since Macri devalued the currency right after taking office in December 2015 — and it’s reviving memories of the crash that led to debt default and social upheaval almost two decades ago.
Under Macri’s marketfriendly government Argentina appears to be plunging back into that kind of financial turmoil. Investors are running out of faith that the president, who came to power after more than a decade of budget-busting populism, can shore up the economy and bring Argentina’s fiscal and trade deficits, and its inflation rate, to manageable levels.
Macri had promised a smooth, gradual fix. That option may be disappearing.
“The market isn’t giving them a choice,’’ said Edwin Gutierrez, the London-based head of emerging-market sovereign debt at Aberdeen Standard Investments. “It’s forcing them to get it over with.’’
The unfolding crisis in Argentina sent tremors through other emerging markets, already shaken last month by a similar — and ongoing — crash in Turkey. The lira fell almost 3 per cent on Thursday, and currencies from Mexico to South Africa also posted losses. Brazil’s central bank intervened to shore up the real with additional swap auctions.
Argentina had some defences in place, after securing the biggest IMF loan in history, a $50 billion credit package agreed to in June.