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ECONOMY | 25-10-2021 11:02

Argentina's Economy Minister Martín Guzmán: 'There will be no devaluation'

Argentina’s economy minister plays down rumours of an upcoming devaluation, declares that record US$57-billion IMF credit-line was “a political loan” that helped finance Mauricio Macri’s re-election campaign.

Responding to last week’s turbulence in the currency markets, Argentina’s Economy Minister Martín Guzmán declared Sunday that "there will be no devaluation" of the peso in the immediate future.

Speaking during a debate on debt restructuring in Buenos Aires, the minister said that the Central Bank "is accumulating reserves," observed that Argentina has a "trade surplus" and declared that "exports are growing."

"There are many saying 'a devaluation is coming.' Last year they were saying the same thing, we said 'no', and it didn't happen. Now we say the same thing: no, there will be no devaluation," said Guzmán.

The minister’s comments come after the peso weakened in local informal and parallel exchange markets last week, with the so-called ‘blue dollar’ reaching a record high of 195 pesos per greenback last Friday as demand for assets in hard currency soars.

Analysts have been speculating heavily about a potential devaluation of the peso after the upcoming midterm elections, which could see the government lose its majority in the Senate after it suffered a heavy defeat in recent primaries.

Speaking at a debate panel event named ‘How to get out of the foreign debt trap’ at the Centro Cultural Kirchner in Buenos Aires on Sunday, Guzmán denied a devaluation is being delayed until after the November 14 vote.

"The Central Bank is accumulating reserves and we have a trade surplus and exports are growing. In other words, we have more resilience and not less on the external front," he argued.

President Alberto Fernández’s administration has to date insisted on a slow depreciation of the official exchange rate, keeping the currency overvalued via strict capital controls to protect reserves as it tries to tamp down on inflation running at more than 50 percent annually. Prices have risen by 37 percent in just the first nine months of the year.

Earlier this week, the government ordered a 90-day freeze on the prices of more than 1,400 household goods to protect citizens, a measure strongly rejected by the opposition and several business leaders. 


IMF loan was ‘political’

Guzmán, who was joined virtually at the event by ex-Ecuador presidential candidate Andrés Arauz and ex-Greek finance minister Yanis Varoufakis (both spoke videoconference link), had strong words for Argentina’s opposition as he moved onto the subject of the country’s outstanding debt with the International Monetary Fund. 

“Ending dependence on the IMF is an act of sovereignty. The IMF is the main problem that [former president Mauricio] Macri's government left Argentina. It financed Macri's [election] campaign and today the Argentine people are paying for it with fewer job opportunities and more inflation,” he said, describing the 2018 record US$57-billion credit line as a “political loan… in support of the previous government” that had the approval of the United States government.

Addressing the country’s bid to restructure its payments and seek a new financing programme with the Fund, Guzmán said a new deal was needed to “reassure the economy.”

"What we have to achieve is that the IMF ceases to be a destabilising burden on the balance of payments,” he said. “We are looking for an agreement that is convenient for Argentina and that implies that the burden is sustainable. The volume of debt is so large that it will take several steps to solve this problem in a way that ends up being sustainable.”

Argentina’s economy, in recession since 2018, is recovering after a devastating decline of 9.9 percent of gross domestic product last year, a slump caused in large part by the coronavirus pandemic. 

Economic activity increased 1.1 percent in August from the previous month, according to the INDEC national statistics bureau. Compared to the same month of 2020, activity grew 12.8 percent. 

Between January and August of this year, gross domestic product is up 10.8 percent on the previous year, according to government data.



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