Peso hits low against black market dollar

Argentina's black market peso slid 5.5 percent to close at a record low against the so-called “blue” dollar yesterday due to further government controls aimed at keeping dollars in the country, traders said. The informal peso, which is measured by Reuters, ended at 8.70/8.75 per dollar, bringing the difference with the official exchange rate to 71.7 percent.

President Cristina Fernández de Kirchner, who uses Central Bank foreign reserves to pay debt, imposed controls on foreign currency purchases soon after she won re-election in 2011 and they have been tightened considerably since then.

On Monday, her government hiked a levy on credit card purchases abroad by five percentage points to 20 percent and extended the measure to holiday packages paid for at home.

The credit card charge can be used as a tax credit to be deducted from income or wealth tax at the end of the year.

Argentines have long used the US dollar as a refuge from economic uncertainty and high inflation at home. Markets have reacted mostly negatively to Fernández’s interventionist policies and local dollar demand has grown in recent months.

Buying dollars and other foreign currency at the official exchange rate is virtually banned, forcing many to turn to the black market and pay a high premium over the official rate or pay the credit card levy to withdraw cash overseas.

The black market exchange rate, or so-called “blue dollar,” had already increased 19 cents on Tuesday.

An analyst said that the reason market demand is so high, is because the fear generated by the new policies is making people purchase dollars to travel and save.

“This new policy is complicating the trip plans of people who wanted to travel abroad for Easter week,” said an unidentified exchange house operator who further commented that “this overreaction is causing people to be desperate.”

In response to the extreme currency fluctuation, President Cristina Fernández de Kirchner immediately called for a night meeting with her economic advisors at the presidential residence in Olivos. Central Bank President Mercedes Marcó del Pont, Economic Minister Hernán Lorenzino and Vice-Minister Axel Kicillof all participated, several news sources reported.

The first surcharge tax applied by the government was announced last September 3, 2012 when the authorities announced that they would slap a 15-percent tax on all purchases made abroad. At that time the dollar was worth 4.65 pesos, while the “tourist dollar” cost 5.34 pesos, making for a 19.29 percent gap with the parallel greenback that at that time sold at 6.37 pesos. The unofficial exchange rate has now increased 27.39 percent since the beginning of the year.

In a mixed intervention the Central Bank sold 90 million dollars and puchased 20 million yesterday. The monetary authority has already sold 90 million dollars last month. The bank’s reserves have fallen US$2.19 billion in 2013 and as of last Tuesday the Central Bank held a total of US$41.1 billion.

Brazil’s real closed at 1.99 per dollar, and at 2.76 pesos. The euro closed at 1.2954 per dollar and at 6.72 pesos.

— Herald with DyN, Ambito.com