The blue dollar
Another step towards a siege economy
Since last year, importers have faced curbs (on May 25th, the European Union filed a complaint at the World Trade Organisation against the import restrictions). But with capital flight continuing, the government has stepped up exchange controls. AFIP, headed by Ricardo Etchegaray, has not explained what criteria it uses in responding to requests for dollars. But the rationing is getting stricter.
The curbs have succeeded in cutting capital flight, from $8.4 billion in the third quarter of last year to just $1.6 billion in the first quarter of this year. The Central Bank’s reserves, which the president has dipped into for public spending, have stabilised, at $47 billion. But this has come at a price: the economy is decelerating fast. And the informal currency market is booming.
Calle Florida, a pedestrianised thoroughfare in the heart of Buenos Aires, is once again thronged with money-changers, as it was in the inflationary 1980s. They offer dollars at competitive rates, in some cases extracting them from their socks. Another loophole is used by companies: in a market known as blue-chip swaps, they buy dollar-denominated sovereign bonds in pesos, transferring them to the United States where they sell them for dollars. El blue—the latest in a long line of Argentine economic neologisms—reached 6.15 to the dollar in late May, up from 5.20 in March. The official exchange rate is 4.47.
The government has made half-hearted efforts to crack down on the black market. Officials have announced that they will prosecute people who buy dollars legally and then resell them for a quick 25-30% profit. Even so, economists reckon that anything from $10m to $40m a day changes hands under the table—as much as the average daily trading volume in Argentina’s stockmarket. Bad though it is for the economy, the two-tier exchange market is politically useful, as a means both of bullying opponents and permitting allies to reward themselves.
Only last October Ms Fernández easily won a second term with 54% of the vote. Since then, the deteriorating economy has cut 20 points from her approval rating. Her nationalisation of most of Repsol’s share of YPF, an oil company, in April, halted but did not reverse the decline. With growth running out, the risk for the president is that her popularity starts to move in inverse relation to the inflation rate.