BUENOS AIRES – Argentine President Cristina Kirchner has said that she will close down her personal savings account in dollars and will convert the money to the embattled local currency, the peso.
Inflation is officially at 9.8 percent, but bankers widely believe it is closer to 25 percent — and locals have been snapping up dollars to retain the value of their savings.
Argentina however has had no access to international markets since declaring a debt moratorium in 2001, so the country depends on its trade surplus — and the precious dollars it generates — as its main source of hard currency.
Kirchner’s announcement on Wednesday, broadcast nationwide from the Casa Rosada, comes amid concerns over capital flight and low currency reserves.
Argentina’s president did not say how much money she was moving into pesos. However the daily Clarin, citing government documents, says that Kirchner has bank accounts worth $3 million.
In the broadcast, Kirchner urged “friends, businessmen and government officials” to follower her example and save in pesos, which she claims is “more profitable” than dollars.
On Thursday, one dollar could buy 4.5 Argentine pesos.
And then, via the Buenos Aires Herald:
Deputy Agustín Rossi, the head of the ruling Victory Front caucus in the Lower House of Congress, yesterday expressed support for a bill to pesify all financial transactions while at the same time warning that consultations still have to be made with the national Government about its approval.
Rossi said that a pesification penned by pro-government Deputy Edgardo Depetri “is in line with us saying that Argentina needs to start thinking more in pesos and less in dollars, but we have to study it and consult it with the Executive Power’s economic area to see what consequences this might generate,” Rossi said . . .
Depetri presented the bill on Thursday. The bill states that “all those agreements, contracts and/or pacts with the objective of modifying or affecting property of assets, personal or real estate properties, will be valid only if they are made in the obligatory and legal currency within the national territory.” The sweeping pesification would include rents and purchases of properties.
These are the sort of stories that came out of Russia in the 1990s as attempts were made to prop up the ruble.
Not a happy precedent.