Leroy N. Soetoro
2018-09-01 17:41:39 UTC
When Argentine President Mauricio Macri told the country he had asked the
International Monetary Fund to speed its disbursement of a $50 billion
loan, he consciously aimed to assuage the fears of uneasy market watchers.
"We have seen new expressions of a lack of confidence in the markets,
specifically over our financing capacity in 2019," Macri said in a speech
posted to Facebook Wednesday, adding: "This decision aims to eliminate any
By Thursday, however, the move appeared to have had just the opposite
effect and Argentine authorities were scrambling to mitigate it.
Argentina's currency, the peso, followed a rough day of trading with a
still more dreadful drop when markets opened again Thursday morning. It
plummeted 15 percent within minutes and spent the rest of the day hovering
at record lows. At one point, a single dollar could buy more than 41
The country's central bank acted quickly in response, raising its
benchmark lending rate 15 points, to 60 percent the highest such rate in
the world, according to The Associated Press. The drastic measure intended
to bolster the currency's sagging value and ease fears of a negative
trend that has also seen a worrisome inflation rate.
The currency has lost nearly 50 percent of its value since the year began.
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The IMF, for its part, has said it's amenable to adjusting the timeline of
its loan to Argentina, which was agreed to in May. The managing director
of the international banking system, Christine Lagarde, said Wednesday
that revisions were warranted in light of "the more adverse international
market conditions, which had not been fully anticipated in the original
Those inclement conditions are rooted partly on what's going on in the
city where the IMF is based, Washington, D.C. It's there that the U.S.
banking system, the Federal Reserve, has responded to a strong American
economy with a couple of small increases to its own key interest rate in
"Because the U.S. economy is strengthening, that is having a ripple effect
in emerging markets around the world. Many of these countries have
borrowed a fair bit in international markets and especially done a lot of
this borrowing in dollars when dollar borrowing was cheap," global
economist Eswar Prasad of Cornell University told NPR's All Things
Considered earlier this month.
"Now," he added, "the chickens are coming home to roost when interest
rates in the U.S. are rising, and it's putting pressure on emerging
markets around the world."
That includes Argentina but it is by no means limited to the Latin
American country. Currencies in Turkey, South Africa and Indonesia have
all suffered to varying extents as the dollar grows stronger and attracts
more international investment away from these emerging markets, Prasad
Within Argentina, the IMF's support does not necessarily come as welcome
news. Many Argentines still blame their country's economic collapse nearly
two decades ago on reforms pushed by the international organization. As
the BBC observes, "going to the IMF is the most unpopular move a president
could make in Argentina."
Lagarde, however, anticipates a far brighter outcome this time around.
"I am confident that the strong commitment and determination of the
Argentine authorities will be critical in steering Argentina through the
current difficult circumstances," the IMF director said, "and will
ultimately strengthen the economy for the benefit of all Argentines."
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