The informal exchange rate, popularly known as the “blue dollar”, reached AR$800 to the dollar, its highest-ever recorded value.

The government has held the official exchange rate at AR$350 since August 14. This means the difference between the two (known in Spanish as the brecha) is 128.6% — the largest since the crisis unleashed after former Economy Minister Martín Guzmán’s untimely resignation in July 2022.

The increase is mostly driven by factors surrounding the October 22 presidential election, according to analysts.

“We come from a disorderly [devaluation] implemented the day after the primaries, which generated a quick pass through to prices, taking monthly inflation to double digits,” said Santiago Manoukian, research lead at consultancy Ecolatina.

Manoukian added that the real exchange rate has fallen behind, and is now lagging by a similar proportion as before the August devaluation. Since August and September’s prices increased by a similar percentage to the devaluation, inflation has already “eaten away” any competitive advantage devaluing could have given the peso. 

The multilateral real exchange rate index measured by the Central Bank increased by more than 17% since the devaluation, meaning that the official exchange rate is as overappreciated as it was before that measure was taken.

Manoukian also said that the government’s recent measures — including bonuses, credit at preferential rates, and tax cuts — worsened the macroeconomic landscape.

Pablo Repetto, Head of Research at the broker Aurum, agreed. “It’s the consequence of a very reckless economic policy where pesos continue to be injected into the market through increased spending,” he said.

Javier Milei, the libertarian economist who shocked the country by coming first in August’s primary elections, wants to shut down Argentina’s Central Bank and adopt the U.S. dollar as the official currency. This is contributing to the rise of the blue dollar, according to Repetto.

“Milei is moving forward with the idea of dollarization, which is causing portfolios to flee the peso even more,” he said, adding: “Nobody wants to keep pesos.” 

The country’s net reserves are minus US$5.1 billion, according to calculations in an Ecolatina report. The Central Bank is buying dollars after the government implemented a scheme to incentivize exports at the beginning of the month, which gives soy exporters direct access to 25% of their dollar earnings as long as they are spent on industrial production.

The government could extend the measure, which ended on Friday, or look for similar ones, according to Manoukian. This week, Economy Minister Sergio Massa announced the Vaca Muerta dollar, which allows oil and gas companies to convert a quarter of their dollar income at the CCL dollar rate, currently AR$822.

However, the government is using reserves to intervene in the secondary bond market to keep the MEP dollar exchange rate, currently at AR$701, at bay.
When it devalued on August 14, the government said it would keep the official exchange rate at AR$350 until November 15. The dire macroeconomic landscape and the electoral uncertainty are complicating that goal.