LatinNews Daily - 09 December 2008

Significance: The peso has been depreciating gradually since August, when it was worth Arg$3.05/$US. At the end of last week it closed at a six year low of Arg$3.4775/$US, following its most sustained fall since convertibility was abandoned in 2002. Nevertheless, Juan Carlos Sacco, the secretary of the influential UIA (which lobbied successfully for a devaluation in 2002) said that the manufacturing sector “is still not competitive".

“Why did we grow over the past five years? Because while Brazil was revaluing the Real, we always had the edge [on the Real]...Then when the international tsunami hit, Mexico, Brazil, Chile and Uruguay automatically devalued their currencies by some 40%, but we stayed still".

The Brazilian Real, which more than doubled in value against the US dollar in the past five years, has depreciated by 38% since its high in August (from R$1.55/US$ to R$2.5/US$ on 8 December). The Argentine Peso has weakened only by around 12% over the same period.

In October, Argentine central bank intervened to put the brakes on the peso's fall against the dollar in an attempt to avoid a run on deposits by jittery investors in the wake of the government's announcement of its controversial plan to nationalise Argentina's private pension funds. It has since allowed the peso to weaken gradually, tapping its reserves to control the currency's depreciation. Local analysts expect that the peso will close the year at above US$3.50.

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