Argentina returns to the brink of the abyss. When it seemed that everything was turning for the better, thanks to the reforms implemented by President Mauricio Macri and a partial return of foreign investments, Buenos Aires finds itself once again in a dangerous balance on a thin thread that could break at any moment.
To cause the new crisis is the weight, collapsed to a minimum despite the moves - too rash for some - implemented by the Central Bank in the last ten days. In just one week interest rates were raised three times, the last one even by 300 basis points. It didn't help. Yesterday the Argentine currency lost more than five basis points against the dollar: a year ago the exchange rate was 15 pesos to a dollar, 24 hours ago it reached 23,08 pesos to a greenback.
In the highlight week of the 40% rate hike, in which $5 billion of domestic resources were spent to prop up the currency, speculation on the peso continued and the gap widened by 12%. Since the beginning of the year, the overall figure has reached -20 percentage points. All this happens in a context where inflation continues to rise, traveling at 25%.
At this point Maurizio Macri gave up. the President of Latin America's third largest economy asked aid to the International Monetary Fund. According to rumors, the negotiations, which have already begun, would concern a loan of 30 billion dollars to be started "very quickly", according to what was stated by the number one of the institution, Christine Lagarde.
“I look forward to continuing our partnership with Argentina. Discussions have begun on how we can work together to strengthen Argentina's economy,” Lagarde continued in a statement.
"We begin today to work to ensure greater support in order to face the new international scenario and avoid a crisis," said the Casa Rosada. Macri, however, is not going to pass for the culprit: "the problem we have today is that we are one of the nations in the world that depends more on external financing, a consequence of the enormous public spending that we have inherited".
But what are the causes of this new crisis? After the woes of the past years, the markets have continued to eye Buenos Aires with wary eyes, although some important reforms have finally been implemented. From an economic point of view, it must also be considered that the foreign exchange market in Argentina is worth "only" 100 million dollars, too small to be sheltered from speculation and volatility. From a political point of view, however, the loss of consensus suffered by the president in recent months and which reached its climax after the introduction of a 5% tax on financial income also contributes to the collapse of the currency. All while corn and soybean crops continue to suffer from drought and consequently affect exports.
