BUENOS AIRES: Argentina will crack down on black market trade in the country's currency, cabinet chief Jorge Capitanich said on Wednesday as the local currency extended steep losses in both official and unofficial trade.
Due to heavy currency controls, the black market has become the only access point to greenbacks available to average Argentines worried about rising inflation. After consumer prices rose more than 25 percent in 2013, the new year has begun with analysts expecting 30 percent inflation in 2014.
Given the country's history of repeated financial crises Argentines tend to try to save in dollars, while heavy-handed foreign exchange controls have driven average people to the black market to get their hands on greenbacks.
On Wednesday, the government said "enough".
"The actions that the government will take will not be announced before they are taken," Capitanich said. "We plan not just actions by the executive but by the judicial branch as well."
The unofficial peso weakened 2.47 percent to more than 12 per U.S. dollar, on Wednesday, leaving it about 70 percent weaker than the official exchange rate, which itself fell more than 3 percent, blasting past the psychological barrier of 7 per dollar.
The day's losses in the official peso were the worst since 2003, when the country was crawling back from a devastating financial crisis. The central bank did little to halt the peso's depreciation on Wednesday, intervening only slightly in the foreign exchange market.
The slide in the black market peso came on top of a 37 percent drop in its value versus the dollar over the preceding year.
In every Argentine city aspiring dollar savers can visit shops, hotels, and specialty "cuevas" or "caves" where pesos can be illegally swapped for greenbacks at the black market rate.
Argentina has one of the world's highest amounts of physical dollars, mostly undeclared, stuffed under mattresses or in safe deposit boxes.
In a country where the middle class is obsessed with gaining access to U.S. currency, any real crackdown on black market peso trade is not likely to help President Cristina Fernandez as she tucks into her final two years in office.
Such a crackdown in any case would be difficult to execute.
Fernandez's status as a lame duck leader was sealed in October legislative elections that saw her congressional allies lose power in the all-important province of Buenos Aires.
Since then the 60-year-old Fernandez has remained mostly out of sight after undergoing surgery to remove blood from the surface of her brain three months ago.
Her policies, from currency controls meant to stop capital flight to heavy stimulus spending unencumbered by inflation targeting, has made Argentina a no-go zone for all but the most risk-hungry investors.
Private economists, rejecting official government data as lacking credibility, say consumer prices rose by more than 25 percent last year, one of the world's highest inflation rates. The government said full-year 2013 inflation was 10.9 percent.
Consumer prices will likely rise about 30 percent in 2014, according to a Reuters poll of analysts last week. That would be the highest rate since 2002 when millions of middle class Argentines were pushed into poverty by a crisis punctuated by a sovereign bond default and 41 percent inflation.
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