The informal (blue) dollar exchange rate fell below AR$1,000 on Friday, further narrowing the gap between the parallel and official exchange rates (known as the brecha in Spanish). The MEP also dipped below the AR$1,000 mark, but was a hair’s breadth above it by late afternoon.

Since peaking at AR$1,250 on December 23, two weeks after President Javier Milei took office, the blue rate has fallen by 21%. On Friday, it fell by 1.5% to AR$985, bringing the gap with the official dollar rate (currently AR$861.7) to just 12.5%. In November 2023, the brecha was close to 200%.

The latest decline in parallel exchange rates comes as the narrowing brecha, coupled with world-beating inflation, make the country more expensive for people who get paid or save in foreign currency.

The MEP rate is the exchange rate implicit when investors buy shares or bonds in pesos and sell them in dollars in the local market. It squeaked back over the AR1,000 line on Friday afternoon, rising 0.5% to AR$1,000.8. Conversely, the blue-chip swap (or CCL) rate fell by 1% on the same day to AR$1,046.4.

The decrease has several causes. The Central Bank bought US$468 million on Thursday, the highest volume since July 2023. Since Milei took office, the monetary authority has bought US$12.1 billion. Gross international reserves are now US$28.3 billion, according to consulting firm Ecolatina.

International reserves are growing in part due to the success of the “blend” dollar, which allows exporters to sell 80% of their dollars in the official market and 20% at the blue-chip swap rate, according to Gustavo Quintana, an analyst and broker for PR Corredores de Cambio. This fresh supply of dollars takes upward pressure off the financial dollar rates, he said.

Argentina is moving into the season for coarse grain harvest and sales, bolstering this dollar dynamic, he noted.

An additional factor is the government limiting monetary issuance, Quintana said. “[Milei’s] famous ‘there is no money’ saying affects those markets,” he said.

“It is probably a consequence of a massive distortion of relative prices that I suppose will take some time to fix,” he said. “Patience.”