The gap between the official and the parallel exchange rates averaged 4% on Tuesday, a historic low. The blue-chip swap exchange rate closed at AR$1076.4 to the U.S. dollar, the MEP exchange rate at AR$1060.5, and the informal “blue” dollar rate at AR$1070. The official rate exchange rate is AR$1047.5.

Economists contend that the gap decreased due to a large supply and a smaller demand for U.S. dollars, low devaluation expectations, and the government’s intervention in the financial markets.

Strict exchange controls in force since 2019, collectively referred to as cepo (Spanish for “clamp”), prevent Argentines from purchasing U.S. dollars freely and originated a myriad of markets for the greenback, both informal and financial. High gaps between exchange rates — known as brecha in Spanish — usually indicate moments of great appetite for the U.S. dollar and are commonly taken advantage of through loopholes and subterfuge. Smaller gaps are usually seen as an indicator of a strong Argentine peso.

Last year, the brecha exceeded 100% amid record inflation rates, a historic drought, and political uncertainty.

In a speech he gave on Tuesday evening, President Javier Milei called the cepo “an aberration” and promised to lift the controls in 2025. 

The agricultural and energy sectors, as well as the tax amnesty launched by Milei’s administration, provided much-needed U.S. dollars. “The agricultural sector accelerated liquidations and set a record, totaling US$ 2.6 billion [in November,] one of the highest figures on record when evaluated in current terms and without taking into account what was transferred to the financial market [through the “blend” dollar],” said a report published on Saturday by economic consulting firm Ecolatina. 

“The energy balance increased the trade surplus by US$ 197 million, resulting in a current account surplus of US$58 million in [November],” the report said.

However, net international reserves are still negative US$6.9 billion.

The Central Bank is also “sporadically” intervening in the financial markets to contain the gap. According to Ecolatina, it spent US$202 million in October, the highest figure since July, when the intervention began.

“In this scenario, I believe that the [parallel] rates could converge towards the official rate, which should act as a floor, thus closing the gap. This dynamic would continue to be in force as long as the positive signals from the disinflation process continue,” economist Gustavo Ber told the Herald. 

Gustavo Quintana, an analyst and broker for PR Corredores de Cambio, said the decrease in the parallel rates is “the result of several factors — a lack of pesos, the need to meet the expenses of this time of the year, exchange rate restrictions, low expectations of exchange rate adjustment, among others.” However, he warned that in the second half of December, “we will see a different panorama” because of the “seasonal increase in the demand for tourism and saving.”

After devaluing the peso by more than 50%, the government started a 2% monthly crawling peg (the peso devaluation rate). The relatively high interest rates encouraged carry trade operations, thus momentarily reducing the demand for U.S. dollars. Last month, President Javier Milei said that if inflation continued to drop, the rate would be reduced to 1% monthly.
Argentines making purchases in foreign currency by card still have to pay AR$1658.4 to the dollar, the highest rate in the market. However, the PAIS tax applied to those purchases is scheduled to be eliminated on December 23.