Argentine Government

This is not in your objective is not desirable in terms of stability of the economy. It is clear that is the Argentine Government’s interest to continue depreciating exchange rate. It is that in one context of depression both of domestic demand as well as external, it does not generate large inflationary risks and allows you to adjust the fiscal accounts, at the time of recomposing the real exchange rate. The target level of the exchange rate for end of the year, is still $4 per dollar. This would keep the real exchange rate at levels similar to the end of 2008, whereas that expected for this year retail inflation rate would be between 15% and 20%.

To maintain the current rate of depreciation that is watching the exchange rate, the price of the U.S. dollar wouldn’t far reach the $4 before the legislative elections. While a dollar to $4 before the elections would not be something utopian, may be a good sign that the BCRA decided to come out with more force to intervene in the foreign exchange market to curb the rise in the dollar. The BCRA has with what to do. On March 20, according to the information that emerges from the BCRA, international reserves held by the Monetary Authority amounted to US $47.025 million.

In addition, on the day yesterday, the Argentine Government signed an exchange agreement with China which allows the country access to a significant amount of Yuan (for a maximum amount of US $10.200 million), delivering pesos in Exchange to pay for imports from that country, which allows to strengthen the financial situation of Argentina so that can preserve one proportion not less than their $. What can you pass beyond from 28th? As I mentioned earlier, the Government there is an upper limit for Exchange located in the $4, beyond which it would not be appropriate to the exchange rate of the dollar. If the dollar continued with its upward dynamic and quoted by end of year well above $4, this might generate consequences highly destabilizing for the Argentine economy, surpassing the potential benefits that exchange rate depreciation would mean for the country. Beyond accelerating demand for dollars and limit its offer, that would increase the inflation risk returning to reactivate their dynamics with the danger that accelerates by own force. Moreover, the financial system is currently experiencing exchange rate dynamics. Banks have had to resort to the rise of passive fees (rates of uptake of funds) to prevent the escape of deposits. Continue with force exchange-rate depreciation, the banking sector make it increasingly difficult to keep deposits in the system, which will also affect the capacity of generating credit for consumption and investment. Beyond of that already several analysts are encouraged to anticipate the dollar will surpass the ceiling of $4, would not represent a good deal for the Government, which will have in it an opportunity to bring some certainty to the markets, at least in the exchange rate aspect. Thus, while Argentina hoped a hand from the international context via the recovery in the price of their commodities (something with very low probability of occurrence in this year), it will have front that RID a hard fight in the foreign exchange market to avoid destabilizing factors of the economy arising from the same. Again, the Argentine Government will have that resolve tensions caused by its own economic policy does achieve learn the lesson?

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