Associated Press, May 23 (Editor Ma Lan) On Wednesday, the Argentine black market peso fell 3.91% against the US dollar to 1280 pesos against the US dollar, a record low. This is related to the political tension in the country and the slowdown in grain exports.
The Argentine peso has been facing a decline for some time because the Argentine Central Bank cut interest rates from 50% to 40% last week. The parallel exchange rate gap between the official exchange rate and the black market has also expanded to about 44%. Previously, the gap was narrowed from nearly 200% to less than 18% due to the rise of Millet.
At the same time, the government led by Millet is also facing the delay of the reform plan. Since the majority of seats in the Congress is not dominant, the continued progress of the reform plan of the Mile government will largely depend on whether the government and local governors can reach an agreement.
Nevertheless, Millet is still obsessed with the full dollarization. On Tuesday, Millay said at a business event that the peso would become a collection in the museum. When the peso becomes very rare, Argentina will be fully dollarized.
This is the plan that Mile put forward when he ran for the presidency of Argentina last year, which caused a great stir in the market at that time. Now it seems that Millet is still very firm about this bold move.
bye! Central Bank
Since he took office as President of Argentina on December 10 last year, Mile has led six interest rate cuts, reducing Argentina's benchmark interest rate from 133% at the beginning of taking office to 40% last week. This has also contributed to the constant depreciation of the peso.
On Tuesday, Mile also shared the draft plan of Argentina's transition from peso to dollar, saying that at the beginning, the government will try to clean up the balance sheet of the central bank and reform the financial system, including repaying local debts. During this period, the peso exchange rate will remain flexible.
However, as time goes by, Argentina will enter the free currency competition, making both the peso and the US dollar the legal tender of Argentina. Finally, the Argentine Central Bank will stop printing pesos, thus promoting the dollar to become the dominant currency.
According to his sharing, the monetary authority will strictly control the peso at an appropriate time, and only allow the peso to depreciate by 2% every month. According to the promise of Mile, the last part of the story is that the Argentine Central Bank will be closed and disappear from the historical stage after the debt is cleared.
Under the leadership of Luis Caputo, the Minister of Economy of Argentina, one-third of the overnight repo debt held by the Argentine Central Bank has been transferred to the Ministry of Finance. Once all debts are paid off, Argentina's capital control will be completely lifted, and the currency will enter the era of "chaos".
However, Millet pointed out that it is not possible to set a specific date for the removal of capital controls, which will be determined by the market. Economic Minister Caputo also agreed that this is not a good time to deregulate.
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