The South American country has wildly divergent exchange rates due to tight currency controls that limit dollar purchases to just $200 a month, pushing people into parallel and informal markets where they pay twice the greenback prices.
The local currency on the official exchange rate weakened 0.5% to around 126 per dollar, in line with normal, while the black market peso plunged 280 per dollar before recovering to 268 or some 113% of the official rate.
Argentinian President Alberto Fernandez appointed Silvina Batakis as the new economy minister late Sunday, following the surprise resignation of longtime minister Martin Guzman, amid growing economic crisis and tensions within the government.
The exit of Guzman, the architect of a $44 billion deal sealed this year with the International Monetary Fund (IMF), has brought to the surface divisions within the government and angered an already weakened President Fernandez before the next year’s elections.
Currency controls in place since 2019 have kept the official peso exchange rate on a slow weakening trajectory, but the gap with popular parallel markets has become increasingly important given the swirling economic crises, the rising inflation and debt fears.
Investors fear a move towards heterodox, or unorthodox, economic policy. Guzman was seen as a more restraining influence, while Batakis is more closely aligned with the hardline left wing of the ruling pronist coalition that wants more spending to help reduce high levels of poverty.
Local consultancy Portfolio Personal Inversiones said Batakis would likely be largely run by “Kirchnerists” around the vice-president. Citi agreed that it would not create the same “equilibrium force” in the vice president as Guzman.
“While we believe Batakis is not necessarily a ‘hardcore’ Kirchnerist, ideologically she is closer to (Vice President) Cristina Kirchner than Guzman,” the bank wrote.
Presidential spokeswoman Gabriela Cerruti told local radio there would be “no changes” under Batakis.
“The economic orientation is guaranteed. The objectives (with the IMF) for the first quarter have been fully achieved. Now Silvina must sit down and take charge of the minister and come up with her own operating scheme,” Ms Cerruti said. .
Argentina: currency separation
Argentina: Currency Separation Interactive Chart) https://tmsnrt.rs/3HFqAsJ
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