Argentina’s peso sharply devalues against dollar
New govt lifts currency controls
BUENOS AIRES, Argentina, Dec 17, (AP): Argentina’s currency sharply devalued against the US dollar on Thursday as the new administration lifted deeply unpopular limits on the buying of foreign currencies, a major change that will expose Latin America’s third largest economy to international market forces in ways not seen in over a decade.
The devaluation, widely expected by economists and even frequently hinted at by new President Mauricio Marci, could exacerbate already soaring prices and spook Argentines, who fear big changes to an economy that has suffered through periodic financial meltdowns.
Minutes after exchange houses and banks opened Thursday, the peso initially traded at around 15 to one US dollar before dropping to 14.30.
That represents a nearly 60 percent drop in value compared to the rate of nine pesos to the dollar fixed by the government over the last year.
The change was put in motion Wednesday night, when Finance Minister Alfonso Prat-Gay announced there would no longer be restrictions on buying foreign currencies. Macri had campaigned on promises to lift the restrictions, saying they hurt businesses at home and scared away would-be international investors.
Attempting to stop capital flight, the pre-
Argentinian Finance Minister Alfonso Prat-Gay arrives for a press conference in Buenos Aires on Dec 16. Argentina said Wednesday it will eliminate the foreign exchange restrictions that have propped up the official value of the peso since 2011, setting up a potentially painful devaluation. (AFP)
ceding administration of President Cristina Fernandez instituted the restrictions on buying foreign currency in 2011. Locally called a “cepo,” or “clamp,” the restrictions were one of many protectionist policies instituted during 12 years of governments led by Fernandez and her late husband and predecessor as president, Nestor Kirchner.
People who wanted to buy dollars, a common practice in a South American country with a long history of financial collapses, had to meet several requirements. And most were limited to a few hundred dollars a month — when US currency was available in banks.
Businesses, especially those needing to deal in dollars, were deeply affected. While the Fernandez administration insisted that dollars coming into the country trade at the official rate, getting dollars out at that rate, if at all, proved difficult.
The result was an often baffling system of multiple official exchange rates. Industries from textiles to agriculture to commercial banks all had different rates, and businesses as well as individuals often traded in illegal exchange houses that were an open secret.
“The cepo was the worst possible thing the last government could have done,” said Daniel Romano, a 57-year-old doctor who stopped by a bank in Buenos Aires to check the rate. “Sure, there is a devaluation today. But this had already been happening for years.”
Indeed, in early trading Thursday, the official exchange rate seemed to be hovering around the recent black market rate, which over the last year had risen to as much as 16 pesos to the dollar.