How Poor Communication Fed Argentine Peso's Collapse

A currency crisis is driving Argentina deeper into a recession. The peso is down more than 50 percent so far this year, competing in a race-to-the-bottom with the Turkish lira as the worst-performing currency in emerging markets. An emergency measure by the central bank, hiking interest rates to 60 percent from 45 percent, didn’t stop the peso’s plunge. Nor has selling reserves. Analysts say the lack of a clear, consistent strategy in South America’s second-largest nation is causing investors and the public to lose faith in the government of President Mauricio Macri.

Though Argentina’s economic problems have been building for a while, the recent collapse was triggered by disjointed and vague communication by elected leaders. On the morning of Aug. 29, Macri said the International Monetary Fund had agreed to expedite cash payments to Argentina as part of a $50 billion credit line. But IMF officials didn’t comment for several hours, and Macri’s government was mum on details of timing and amounts. Eventually, the IMF said only that it would consider Argentina’s request to speed up disbursements. The Fund’s Director, Christine Lagarde, will meet with the country’s Treasury Minister, Nicolas Dujovne, on Tuesday to discuss revisions to the agreement.