The Argentine Minister of Economy, Sergio Massa, does everything possible to keep the exchange rate under control, as he knows that any sharp depreciation of the peso against the dollar will weaken his presidential candidacy.
The drastic reduction of the reserves of the Central Bank of Argentina responds to several reasons. Foreign exchange income for the country from agro-industrial exports has plummeted due to an unprecedented drought that has caused losses of 20,000 million dollars to the countryside.
In parallel, the banking entity has had to part with reserves to meet external debt commitments. The Central Bank has also used them to intervene in the exchange market that companies access to obtain dollars with which to pay off their obligations.
In 2018, under the presidency of Mauricio Macri, the IMF granted Argentina the largest bailout in its history, worth 57,000 million dollars. Only 44,000 were delivered, but that enormous debt has been like the rock of Sisyphus for the government of Alberto Fernández. Getting in the way first was the collapse of economic activity due to the COVID-19 pandemic and then the increase in food and energy prices due to the war in Ukraine. The debt was refinanced in 2022, and the conditions were relaxed at the beginning of this year, but the severity of the drought also dynamited the new commitments assumed.
In June, the IMF should have disbursed 4,000 million dollars. It did not do so because Argentina failed to meet two of the three goals agreed for the first quarter of the year: the accumulation of reserves and the fiscal deficit goal. The latter would have to be below 2%, but it is estimated that it will close the year above the 2.4% of 2022.
“The challenge for the government went from how to accumulate reserves to how to retain reserves,” says Santiago Manoukian, head of research at the Ecolatina consultancy, about the first of the unfulfilled goals.
In other words, the countryside is confident that sooner rather than later the government will be forced to devalue.
On Friday, in the streets of downtown Buenos Aires, up to 522 pesos were offered for each US dollar. It is a small market, but the variations in its price are disseminated daily in the media and have a great influence on the expectations of the population because it is the one they mainly turn to to acquire dollars, the savings currency in Argentina due to its history of devaluations and high inflation.
