ON JANUARY 22nd Argentine President Cristina Fernández de Kirchner appeared in public for the first time in over a month. She may wish she had stayed out of sight. Earlier that day the official exchange rate of the Argentine peso had weakened by 25 cents to 7.14 pesos to the dollar, its biggest daily decline since the crisis of 2002. Since then things have got even bumpier. On January 23rd the peso fell by over 86 cents to 8 pesos to the dollar in the retail market, and by even more in the wholesale market. The Central Bank eventually intervened to stabilise the currency at 7.79 to the dollar, but Argentina has still seen a devaluation of more than 15% in just 48 hours.
The Argentine peso has long been heading for a fall. It has looked overvalued since at least 2011, when the government clamped down on all foreign-currency transactions in an attempt to stem capital flight. With inflation running at 25%, Argentines are desperate for access to dollars. The black-market exchange rate has at times exceeded the government’s artificial rate by as much as 70%.
In a bid to close that yawning gap, the government has been allowing the peso to...Continue reading
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