By Jorge Otaola and Walter Bianchi
BUENOS AIRES (Reuters) – Argentina’s closely-watched black market peso crashed around 11% after the country’s economy minister quit abruptly over the weekend and was replaced by an economist more closely aligned with the far-left wing of the ruling Peronist coalition. The controlled official rate edged down slightly.
The South American country has widely divergent exchange rates due to tough currency controls that limit dollar purchases to just $200 per month, pushing people into parallel and informal markets where they pay twice the price for greenbacks.
The local currency on the official exchange rate weakened 0.5% to around 126 per dollar, in line with normal, while the black market peso plummeted to 280 per dollar before clawing back to 268, some 113% away from the formal rate.
Argentine President Alberto Fernandez named Silvina Batakis as the new economy minister late on Sunday after the shock resignation of long-standing minister Martin Guzman amid growing economic crises and tensions within the government.
The exit of Guzman, the architect of a $44 billion deal sealed this year with the International Monetary Fund (IMF), brought splits in the government to the surface and dented an already-weakened President Fernandez ahead of elections next year.
Currency controls in place since 2019 have kept the official peso exchange rate on a slowly weakening path, but the gap to popular parallel markets has become increasingly wide given a swirling economic crises, high inflation and debt fears.
Investors fear a shift towards heterodox, or non-orthodox, economic policy. Guzman had been seen as more moderating influence, while Batakis is more closely aligned with the harder-left wing of the ruling Peronist coalition that wants more spending to help alleviate high poverty levels.
Local consultancy Portfolio Personal Inversiones said Batakis would likely be largely led by the ‘Kirchnerists’ around the Vice President. Citi agreed she would not create the same “balancing force” to the Vice President as Guzman had.
“While we believe Batakis is not necessarily a ‘hardcore’ Kirchnerista, from an ideological point of view she stands closer to (Vice President) Cristina Kirchner than Guzman,” the bank wrote.
Presidential spokeswoman Gabriela Cerruti told local radio that there would be “no modifications” under Batakis.
“The economic direction is guaranteed. The goals (with the IMF) for the first quarter were fully met. Now Silvina has to sit down and take charge of the Ministry and come up with her own operating scheme,” Cerruti said.
Argentina: currency split https://tmsnrt.rs/3zXEJ2y
Argentina: currency split (Interactive graphic) https://tmsnrt.rs/3HFqAsJ
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(Reporting by Walter Bianchi and Jorge Otaola; Additional reporting by Marc Jones and Jorgelina do Rosario; Writing by Adam Jourdan; Editing by Chizu Nomiyama and Bill Berkrot)
