Argentina’s black-market currency exchange rate, popularly known as the “blue dollar,” breached the psychological mark of 1,000 pesos per U.S. dollar on Tuesday.
Mistrust in the country’s currency has been at its highest since the turn of the century, with eccentric libertarian economist Javier Milei the favorite to win the elections on a platform of dollarizing the economy following multiple failures to stop inflation from governments across the political spectrum.
The country has multiple exchange rate values for its battered peso, which officially trades at ARS 350 per USD. But that value is only available to an increasingly small number of importers and exporters, with most other businesses and citizens forced into alternative black and gray markets in order to trade with foreigners or get hold of hard currency.
Economy Minister Sergio Massa, who is also the presidential candidate for the ruling Peronist coalition, has resorted to all kinds of short-term ruses in order to stop the run against the peso. These include selling massive amounts of hard currency reserves at the subsidized official exchange rate, selling dollar-denominated bonds held by state-owned pension administrators, asking for emergency foreign loans, and more.
But none of this has been enough to stop the run against the peso, which stood below ARS 300 per USD when he took office last year, as inflation is now moving at an annualized yearly rate of more than 300 percent due to a combination of years of budget deficits and massive peso-denominated debts which can only be financed through further money printing.
The run against the currency will add another difficulty to Mr. Massa’s presidential bid, after his coalition finished third in the country’s August 22 presidential primaries, although pollsters say he could rise to second as some voters of the center-right coalition shift to Mr. Milei for pragmatic reasons, giving Mr. Massa a chance to reach a runoff.
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