The dollar sharply declines in Argentina, with exchange rates dropping by 4%

On a day marked by rumors of a possible currency unification in the middle of the year, financial dollars experienced a significant decline.

The Dollar & Argentina, a never-ending friendship.

On Wednesday, February 14th, the MEP dollar and the CCL (Blue-Chip-Swap rate) plummeted to one-month lows, with the market awaiting January’s inflation data to be released by the National Institute of Statistics and Census (INDEC) this afternoon.

In this context, the MEP (Internal Argentine use) dollar falls by $51.57 (-4.4%) to reach $1,121.79, after ending the previous week with a decrease of $64.07 (-5.2%), the largest in two months. Thus, the gap between this exchange rate and the official one stands at 35.5%.

On the other hand, the CCL dollar drops by $51.57 (-4.4%) to $1,175.97. Thus, the gap with the official exchange rate stands at 41%.

This happens as Argentina awaits the official inflation data for January. The data indicates a slight decrease. It will be between 21% and 19%, according to market sources.

The government had postponed tariff increases. The transportation hike, which was supposed to be the first of the month, was delayed. The gas increase that was scheduled for February was pushed to March. In the case of electricity, it increased, but only for those sectors that no longer had subsidies.

Economists also noted a halt in the rise of mass consumption items. “The post-devaluation increases were overlooked, and sales plummeted, resulting in a reaction on the price side. In the last three years, companies had a supply problem, not a demand problem. Now they have a demand problem due to the contractionary policy, so they have to see how things work out.

The situation has improved since the economic program began, with reserves increasing $6,500 million.

In addition to that, the fiscal package is contractionary. It’s proposing a zero financial deficit, the government is not issuing new pesos, and there’s no credit available, so Argentina is tightening in an extremely regressive way to stop inflation.

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Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.