The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

Latin America: Argentina recalibrates

Peso and exchange reserves have taken a tumble, interest rates have spiked and the money supply has tripled, yet analysts remain confident the economy is fundamentally sound. Can president Kirchner get full control, or will she leave it to the next government?

International investors have singled out Argentina. Confidence and capital – both already at low levels – drained away in January as the US Federal Reserve’s tapering of quantitative easing continued to put potential emerging market weakness at the forefront of investors’ minds. However, the recent sharp devaluation of Argentina’s currency and the dramatic rise in interest rates do not go nearly far enough to address the country’s underlying economic problems, say analysts.

At the end of January, the government, led by president Cristina Fernández de Kirchner – who represents the Justicialist (or Peronist) Party and who has been in office since December 2007 – allowed the peso to depreciate by 18% in one week to Ps8 to the dollar. This is the biggest decline since the devaluation amid extreme economic circumstances in 2002 and is a record low for the peso.

The devaluation was accompanied by a 900 basis point increase, to 28.5%, in the yield of the short-term bills used to sterilize the resulting capital outflows. The central bank increased the benchmark Badlar deposit rate to around 25% from its 21.5% level at the end of 2013.

The government also lifted the ban on the purchase of dollars for savings purposes, one of the most stringent exchange controls, in place since mid-2012.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree