Argentina’s government is trying to load on the heavy cosmetic treatment, as tightened currency controls have worsened rather than slowed a free fall in the country’s international reserves and in the performance of the peso. The administration of President Cristina Fernandez de Kirchner is hoping to bring the official and parallel exchange rates closer together by selling the nationalized pension industry’s bonds, in yet another iteration of Argentina’s scramble to pick up the pieces after years of disastrous economic policies. Bloomberg reports:
Argentina’s state pension fund sold government dollar bonds due 2018 to local investors yesterday for the first time in a bid to strengthen the peso in the so-called blue-chip swap market.The agency, known as Anses, sold $2.7 million of the notes which were issued in a private placement in 2011, according to data compiled by the Buenos Aires Stock Exchange. The sale into the secondary market helped strengthen the implied peso rate to 9.17 per dollar from 9.31 a day earlier. Investors use the blue-chip swap market to obtain foreign currency by exchanging peso-denominated assets for dollar assets at a rate that is about 38 percent weaker than the official rate of 6.6246.“This signals a greater intervention in the foreign exchange market at the cost of not selling the bonds abroad to accumulate reserves,” Alejo Costa, head of research at Puente Hnos Sociedad De Bolsa SA in Buenos Aires, said in an e-mail.
2014 is a big year for Argentina. History gives us little reason to think the country’s ruinous pattern of “alternative” economic models will lead to anything in the short-term other than the reemergence of black market money changers, or in the long-term other than yet another “unconventional” solution. But this could be a banner year in Argentina’s manic-depressive economic history: the US Supreme Court has agreed to hear Argentina’s appeal of an appeals court decision that Argentina must repay its creditors in full. Argentina is hoping the Supreme Court will rule that bondholders who declined to participate in the debt exchanges don’t need to be paid at all, but if not, Argentina could be facing its second multi billion dollar default in just over a decade. All this as inflation continues to rise, capital flees, and strikes, riots, looting and blackouts spread.We’re only a few weeks into 2014, but things already aren’t looking good for one of 2013’s biggest losers.