Sun Sentinel Palm Beach Edition
World Cup aggravates Argentina’s peso woes
BUENOS AIRES, Argentina — Argentina’s efforts to stabilize the peso are being undercut by the100,000 soccer fans Brazil expects to travel across the border to see the national team led by Lionel Messi try to win a third World Cup title.
Each fan will dole out about $2,000, bringing total spending to $200 million, according to Luis Secco, the director of Perspectiv@s Economicas in Buenos Aires.
Argentines skirting currency controls by buying dollars in the black market will put pressure on the exchange rate, which has tumbled 8.7 percent in the past month, while consumption by travelers using credit cards or buying pesos on the official market would dent reserves already hovering near an eight-year low at $28.6 billion.
President Cristina Fernandez de Kirchner’s three years of capital controls have proven ineffective at safeguarding reserves used to pay creditors or halting a slide in the currency, prompting her to devalue the official rate for the peso in January by the most since 2002. If the 42 percent gap between the official and black market peso rate widens on increased dollar demand, soybean farmers whose crops are the main source of export revenue will begin to hoard their harvest in expectation of a second devaluation this year, Secco said.
“The longer Argentina lasts in the tournament, the greater the demand for dollars,” said Secco, who plans to fly to BeloHorizonte to see Argentina play Iran on June 21.
If Argentina gets to the final stages, “you’re going to get people making expensive last-minute trips and needing cash to pay for tickets so that could put additional pressure on the market.”
Argentina, which devalued the peso 19 percent in January to stemthe loss of reserves, controls sales of dollars at the official rate and slaps a 35 percent tax on credit card purchases abroad to dissuade spending in foreign currency.
The dollars in the central bank’s vaults are critical for Argentina because it has been locked out of international capital markets since a record $95 billion default in 2001. The government owes $907 million in interest at the end of this month and another $650 million to the Paris Club in July.
The peso has tumbled 13 percent this year in the black market to 11.55 per dollar as the official peso declined 20 percent to 8.1297 per dollar.
About 100,000 Argentines are expected to attend the first three group stage matches with as many as 40,000 for the final group stage match againstNigeria in Porto Alegre in southern Brazil because of its proximity to the Argentine border, said Joel Sampaio, a spokesman at the Brazilian embassy. That number could increase if Argentina progresses further in the tournament, Sampaio said.
While demand for dollars during theWorldCup “doesn’t help,” it will be insignificant compared to the other challenges Fernandez faces such as high inflation and an economy which contracted inMarchfor the first time since September 2012, said Alberto Ramos, the chief Latin America economist at Goldman Sachs.