Argentina Combats Black Market Currency Trading

To buoy falling confidence in the Argentine peso, Argentina's government has been tightening control over the country's illegal currency markets. The U.S. dollar remains the most liquid and resilient banknote in Argentina, and consumers have little faith in the value of the peso. This has caused the gap between official and unofficial rates of the peso to widen abruptly. But in recent days, after Argentine Secretary of Domestic Trade Guillermo Moreno made several public statements and personal appeals to bankers active in unofficial currency markets, black market trading of the dollar slowed considerably.

The pressure to devalue the peso is stressing the country's already declining foreign reserves, but the government can count on an influx of foreign exchange in April, when farmers convert revenue from exported crops. Moreover, a sharp official devaluation of the peso is made unlikely by the possible political consequences of such a move. Parliamentary elections will be held in October, so major attempts to address some of the underlying causes of Argentina's cyclical currency crises appear unlikely in the meantime. Instead, the government will continue to rely on direct interventions to stabilize the black market until more substantial measures can be attempted.