Argentina’s New Economic Minister Faces Daunting Task

Argentina’s new Economy Minister Sergio Massa has pledged to stop printing money that helps fuel runaway inflation. With the country facing a deepening economic crisis, Massa became the third economic minister in a month. 

He inherits the enormous challenge of taming inflation that now stands at over 60%, and is expected to reach 90% by the end of this year. He must also grapple with a rapidly-devaluing Argentine peso.

The country has been cut off from international capital markets in recent times, forcing it to print money to cover its chronic and yawning fiscal deficit. Massa faces a huge task of increasing the central bank’s dwindling reserves with few levers at his disposal.

The Argentinian peso has devalued massively, causing the government to launch what it calls the “Dollar Blue,” which is the unofficial rate of buying or selling physical US dollars on a government-sanctioned parallel market. 

The transactions occur without the assistance of a bank or government oversight, often taking place in storefronts or on streets. In October 2021, the Dollar Blue exchange rate was 195 pesos per US dollar. Today, it hovers at just under 300 pesos per dollar.

What does this mean for me? 

Argentina wants to finance its budget by reducing its deficit through private lending. The country is considering four loan offers by three international banks and a sovereign wealth fund. The road ahead is rocky. As a FOREX trader, it serves you to know which countries have distressed economies so you can investigate trading in their currencies.