Paul Terhorst – Last October we reported on Cristina Kirchner’s newly re-elected government in Argentina. We predicted she would continue with her plans to nationalize private industry and to make Argentina ever more expensive.
True to form, in April Cristina took over oil producer YPF, Argentina’s largest private company. But she’s having a tougher time holding the peso in line to make Argentina more expensive. Cristina kept the official exchange rate at 4.40 all right, but the black-market peso went to 6 earlier this month.
HSBC says Cristina is studying an asymetrical devaluation, with separate exchange rates for imports, exports, and the rest of us. Under the new scheme importers would have to pay a fortune to bring goods into the country. Exporters would be forced to sell their dollars for next-to-nothing. Tourists and the rest of us would use the third exchange rate or, more likely, stick with the black market.
Multiple exchange rates have failed over and over in the past, so Cristina is likely to try them again. At best the new rates might buy time until the harvest comes in over the next few months. Look for details of whatever she decides to emerge in the next few weeks.