Argentine Central Bank Reserves Fall to 9-Year Low Before Runoff

  • Bank said to have sold $610 million this week to defend peso
  • Government trying to prevent weaker peso before election

Argentina’s central bank reserves fell to the lowest since 2006 as the nation, locked out of global capital markets, burns cash to defend the peso ahead of a runoff election on Nov. 22.

Gross reserves fell $94 million to $26.7 billion, the central bank said in an e-mailed statement. While the government managed to bolster reserves through an $11 billion currency swap with China that began last year, debt payments, dollar sales to individuals for savings and daily interventions in the foreign exchange market to defend the peso have caused the funds to tumble in the past month.

President Cristina Fernandez de Kirchner, who leaves office Dec. 10, uses a crawling peg to control the official exchange rate of 9.58 pesos per dollar while a myriad set of capital controls have spawned a black market where Argentines pay as much as 15.14 pesos to buy a greenback. The government’s refusal to quicken the pace of depreciation as its major trading partners have, as well as the end of the harvest season when grain exports add to central bank coffers, have caused reserves to slide.

The government also used $5.9 billion of reserves to meet a bond payment last month.

Ruling party candidate Daniel Scioli, who has promised to maintain capital controls initially if elected and make gradual economic changes is trailing in early polls to the opposition’s Mauricio Macri. Macri says he would lift controls immediately and depend on the confidence from investors to rebuild reserves if elected.

The central bank has sold $610 million in the currency market this week, according to a bank official who isn’t authorized to speak publicly on the matter. In the latest publicly available data, the bank sold $549 million in the week before the Oct. 25 first-round vote. The government also sold a record $700 million to Argentines for savings in October, which comes out of reserves.

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