Argentina’s informal dollar exchange rate, popularly known as the “blue dollar,” rose by over AR$24 on Monday and reached AR$552 for the first time in history. The record-high nominal value means that the blue dollar is almost double the official rate, which closed at AR$284.

“Today’s increase mostly reflects the lack of certainty around the agreement with the IMF, the fact that the government is driving many companies towards alternative dollar exchange rates, and political uncertainty less than a month from the primaries,” said Juan Ignacio Paolicchi, chief economist of the consulting firm Empiria. 

“The rise of the blue dollar is due to Argentina’s own inflationary dynamic. It should be noted that we had two months with curiously calm informal exchange rates, which were fluctuating between AR$490 and AR$500,” Paolicchi said. “Until last week, the dynamic of the fluctuating exchange rates seemed to be more a consequence of inflation and a logical adjustment in a context where prices course-correct .”

Monday’s marked increase comes as Argentina continues tough negotiations with the International Monetary Fund (IMF) — official sources told the Herald expects to sign a Staff-Level Agreement with the lender by the middle of this week following months of talks. Earlier on Monday the government implemented new taxes for imports of goods and services, also granting a higher exchange rate for some agricultural exports (although soybeans are excluded).

Federico Furiase, director of Anker Latinomérica, described the new measures as a reflection of the government’s political restrictions that preclude it from devaluing and pressures from both the IMF and the Argentine financial market.

“What the IMF and the market are asking for is to solve macroeconomic problems in order to accumulate more reserves,” said Furiase. “We are in a situation where there are no benign options due to macroeconomic vulnerability.” 

“The key is whether the IMF disbursement is enough to show the market that there is enough ammunition to calm the financial dollar market.”

Economy Minister Sergio Massa — who is also the presidential candidate for the ruling coalition Unión por la Patria — announced on Sunday night that Argentina will receive a “big disbursement package” from the IMF in August that will “largely cover” this year’s debt payments with the credit organization. 

“The increase is in part due to negative expectations regarding the measures. The increase of alternative exchange rates pushes the ‘blue dollar’ rate at the same time,” said Gustavo Quintana, an analyst and broker for PR Corredores de Cambio. “It’s operating with a low supply of foreign currency and that translated as a price increase.” 

Argentina is going through a major international reserve scarcity crisis, which deepened due to this year’s historic drought.

“Apparently, the market is interpreting that the new measures don’t contribute towards solving the structural problems the economy faces,” Quintana said. “We shouldn’t forget that the blue dollar is a smaller market, where any sudden change alters prices. I don’t think it was anything in particular, but a combination of factors.”

Quintana echoed Paolicchi’s electoral considerations, saying that they tend to “push investment portfolios towards dollarization.” Argentina’s primary elections (PASO, for their Spanish acronym) will be held on August 13, the run-up for which has showcased fractures in the country’s main electoral coalitions, particularly in the presidential race. 

“I think more forceful action was expected from the government, which didn’t come in the end,” Paolicchi said.

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