LatinNews Daily Report - 20 May 2013

ECONOMY| BCRA reserves continue to fall. On 17 May Argentina’s central bank (BCRA) reported that its level of foreign reserves stood at US$38.85bn, after the bank’s liquid assets dropped US$100m on the day. The level of BCRA’s reserves is now the lowest since May 2007 when it was US$38.84 and it is expected to continue falling following the trend first observed in 2011 after the Argentine government led by President Cristina Fernández introduced stricter controls on access to foreign currencies in the country. The lack of availability of foreign currency, in particular US dollars, has led to a situation where demand for US dollars in Argentina has shot up and more people are turning to the irregular ‘blue’ market to try to get them. This in turn pushed up the ‘blue’ dollar rate which has dragged up the official government-set exchange rate. The end result is that BCRA has found itself having to prop up the artificial official rate while at the same having less and less access to dollars itself as the currency dries up in the local financial system. This has prompted the Argentine government to act, announcing improvised measures aimed at getting undeclared dollars deposited into the financial system. These have yet to come into effect, however, and BCRA’s reserves are continuing to dwindle in the mean time. The latest results show that since the start of the year, BCRA reserves have fallen by US$4.4bn or 10.25%. Local analysts highlight that the situation is unlikely to improve soon given that in the last 45 days, BCRA has only been able to purchase US$666m from the local currency market whereas in the same period last year (just after the first soybean harvest, when the market is flush with foreign currencies) BCRA had obtained US$2bn.

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