As the Argentine peso continues to lose value in relation to the U.S dollar, Argentina’s President Mauricio Macri announced Tuesday his government will seek an agreement with the International Monetary Fund (IMF) to guarantee financial support.
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“We will begin working on an agreement with the IMF today,” President Macri said during a televised address from the Presidential house. The announcement was made in hopes of stopping the devaluation of the peso, which reached 23.50 per dollar, a new record.
“During the first two years we had favorable conditions, but that is changing. Interest rates are increasing, oil is up and other variable we don’t control. We are one of the countries that depends the most on external financing,” Macri explained during the short video.
In 2015, when he assumed the office of the presidency, Macri reversed two policies maintained by the government of Cristina Fernandez by eliminating controls on the exchange rate and regulations on the financial market.
Last week, Argentina’s Central Bank increased the interest rate to 40 percent to try to mitigate the devaluation of the peso, which lost 15 percent of its value in 10 days due to capital flight towards the United States.
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The new interest rate sought to promote savings and make the currency attractive. According to BBC economist Martin Alfie the rate “makes credit more expensive, generates uncertainty and makes people think that financial investment is more profitable than any other.”
On Tuesday the dangers of the new interest rate, the highest in the world, became a new devaluation.
Finance minister Nicolas Dujovne said IMF financing “is the cheapest we have available… and doesn’t increase the debt for Argentina because it simply replaces other, more expensive debt.”
However, he has refused to provide details over the amount and the conditions tied to a possible financial agreement. The devaluation and the announcement of a new IMF negotiation raises fears among the population.
An agroindustrial worker told EFE the current situation reminds him of what happened during the eighties “the dollar and inflation skyrocketed and he (the president) had to resign.” After that the economic situation worsened, in part thanks to the IMF structural adjustment program applied, Argentina faced its worse economic and financial crisis.
Macri’s economic policies to curb inflation have been accompanied by unpopular policies like price hikes to utilities, transport and basic services, massive layoffs and tax cuts for wealthy economic sectors like mining and agroindustry.