Fernandez Ditches Argentina for Cuba Summit Amid Crisis
Argentine President Cristina Fernandez de Kirchner is traveling to Cuba days before a regional summit begins while her country reels from the largest devaluation of the peso in 12 years.
The peso’s 15 percent decline against the dollar this week, combined with the government’s announcement yesterday that it will ease currency restrictions starting Jan. 27, is causing confusion among Argentines unsure how much the peso will be worth. Roberto Iskandarani, who owns two luggage stores in downtown Buenos Aires, said his suppliers won’t fulfill orders due to the uncertainty.
“They’re waiting for the peso to stabilize,” Iskandarani, 76, said. “They don’t want to sell and lose 20 percent. The government is doing things without a plan.”
Fernandez, who underwent surgery to remove a blood clot near her brain in October, has made one public appearance since Dec. 19, announcing a stipend for students. Flying to Cuba days ahead of next week’s summit of the Community of Latin American and Caribbean States fuels a perception that the government has no plan to address the unfolding crisis, said Buenos Aires-based pollster Felipe Noguera.
“In Argentina many people are asking who is governing,” Noguera said in a phone interview. “If she’s trying to give an impression that nothing is going on, I don’t think it’s a good strategy.”
Officials at the presidential palace didn’t respond to messages from Bloomberg News seeking comment on the timing of Fernandez’s departure, which was confirmed by the state-run news agency Telam. No itinerary for Fernandez’s trip has been announced. Brazilian President Dilma Rousseff and Mexican President Enrique Pena Nieto are among Latin American leaders expected to arrive in Havana next week.
In a Jan. 22 speech, the 60-year-old Fernandez mocked criticism of her silence over the Christmas and New Year’s holidays.
“I hope nobody criticizes this national address after so much clamor for my presence,” Fernandez, whose term ends in December 2015, said. “They wanted to create the sensation that I couldn’t carry on.”
Decades of economic volatility, including a 2001 default on $95 billion in bonds that precipitated an end to the peso’s 1-to-1 peg with the U.S. dollar, have long prompted Argentines to invest in greenbacks. In 2006, the U.S. Federal Reserve estimated that Argentines had at least $50 billion in U.S. cash, about one of every nine dollars then circulating abroad.
Argentina’s government yesterday scrapped some of the currency controls it first introduced following Fernandez’s 2011 re-election as it sought to restore investor confidence and close a gap in the official and black market rate of the peso. The gap was fueled by the restrictions and an annual inflation rate of about 28 percent, the highest in Latin America after Venezuela, according to reports by independent economists published by opposition lawmakers.
The difference between the two exchange rates narrowed to 46 percent yesterday after the official peso weakened 1.5 percent to 8.0014 per dollar while the street rate declined to 11.7 pesos per dollar from 13 pesos yesterday, according to Buenos Aires-based newspaper Ambito Financiero.
Electronic goods store owner Roberto Campos, 46, raised prices 20 percent yesterday following the peso’s decline earlier in the week. He was skeptical that the government will allow people to buy dollars on Monday, saying it will probably create bureaucratic obstacles in a bid to restrict access.
Sales at Campos’s store rose about 10 percent in the wake of the devaluation as people bought before prices rose, he said. Business will probably slow in the medium-term as the government continues to let the peso slide, he said.
“This is just the beginning,” he said while staring at a computer that was updating prices on his goods to reflect the new exchange rate. “Last year there was lots of uncertainty, now the uncertainty is a reality.”
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