Argentine financial crisis, running out of dollars and worries about deposits

Dollars run out of scary speed Central Bank of ArgentinaAnd, according to observers, the country may face a new crisis more severe than the one it faced last year, according to observers, as the government completely failed to meet the needs of the necessary imports, at a time when the country suffocates the exorbitant price tag of goods amid the Corona pandemic and the collapse of the national currency, the “peso.”

“Argentina faces dramatic challenges as the country steps in,” International Monetary Fund Director Christina Georgieva said on Wednesday A deep recessionAnd the social conditions are getting worse, and the economic imbalance is increasing. “
Argentine President, Alberto Fernandez, admitted on Saturday the severe monetary crisis afflicting the country, and the noticeable shortage of hard currencies needed to run the economic wheel, pay off external debts and finance the import bill.
Among the signs of the depth of the financial and economic crisis that Argentina is suffering from is the deterioration of the exchange rate of the national currency, the peso, and the frightening and accelerating difference between the official rate and the parallel market price or the black market, as the exchange rate of the Argentine currency on the black market fell to 130 pesos to the dollar in August The past, and to 167 pesos last week, compared with the official rate of 82 pesos to the dollar.
This reflects the accelerating acceleration of the deterioration of the national currency’s rate, at a time when the Central Bank does not find the dollars needed to support the exchange rate.

According to US data, foreign reserves at the Argentine Central Bank decreased from $ 6 billion in mid-August to $ 1.6 billion last week.
Argentine companies face difficulty in obtaining the dollars needed to pay the necessary import bills for the industries, and suppliers usually resort to the black market to buy dollars, which automatically led to the deterioration of the peso and the increase in the cost of the product.
And holders of dollar accounts in Argentine banks are afraid of a government decision to convert their dollars into the local currency, amid the distress afflicting the country. This will mean that they will suffer heavy losses that may make them lose more than half of their wealth if this happens, by calculating the current difference between the official price of the peso and the black market price.
The director of a major bank branch in the capital, Buenos Aires, advised the bank’s clients to withdraw dollars from their accounts before an official decision was made to convert them into the local currency.
“In these countries, we do not have an honorable history that gives security to depositors by leaving dollars in their bank accounts,” the banker said in comments regarding this matter. “The government previously issued a decision to convert dollar accounts into local currency accounts,” he added.
While rumors circulate in the country about the conversion of dollars into the local currency on the Argentine street, President Alberto Fernandez asserts that this will not happen.
According to the “Buenos Aires Times” newspaper, Fernandez said on Saturday, “We are facing a shortage of hard currencies, and there is mistrust among citizens due to incorrect rumors that we are planning to devalue the currency, or are working to seize people’s deposits in banks … This will not happen. ” The Argentine president also responded to rumors in the Argentine street that “the government is not interested in supporting businesses.”
Regarding the future of dealing with the country’s financial crisis, the English-language “Buenos Aires” newspaper said in its Sunday edition that the International Monetary Fund will begin in mid-November next official talks with the government of President Alberto Fernandez, to lay down a new financial package to save the country from its clutches. Bankruptcy.
In its report issued last week, the Fund expects the Argentine economy to contract by 11.8% this year.

Argentina is the second economy in Latin America, and its bankruptcy will constitute a major financial crisis for the entire Latin American continent, as the size of its economy is estimated at $ 445 billion in 2019, and its population is estimated at 45 million. Consequently, its bankruptcy will have dire repercussions on the whole countries of the continent that are already suffering from the bankruptcy of Venezuela, and economic troubles in many of their countries.
Despite the political differences between the Argentine government and the US administration, Washington is keen to save the Argentine economy, for reasons the most important of which are fears of losing political influence in the Latin continent.
Washington fears that the entire Latin continent will fall into the arms of Beijing and Moscow, in the event that Argentina are not financially helped out of this stifling financial crisis.
Beijing and Moscow are installing atomic missiles, similar to what happened in Cuba during the Pig Bay crisis, which almost sparked an atomic war in the 1960s.
It is reported that Argentine President Fernandez revealed in a telephone conversation with his Chinese counterpart Xi Jinping at the end of last September, the desire to increase the volume of financial and economic cooperation with China.

For his part, Xi said Beijing wants to import more primary commodities from Argentina.
The government of President Fernandez had failed to service the debts of a previous $ 57 billion loan provided by the fund, of which Buenos Aires disbursed about $ 44 billion.
The IMF official, Julie Cusack, responsible for the Argentine file, had visited Buenos Aires at the head of a delegation from the Fund for 5 days, during which she held meetings with many political and economic actors.
Cusack said the delegation will return to design the rescue package in November. Stressing that “we have a deep understanding about the crisis and the government’s plans for economic stability and the path of transformation towards comprehensive growth in the country.”
By the end of 2019, Argentina’s foreign sovereign debt amounted to about $ 323 billion. In August, the Argentine government was able to reschedule debts worth 65 billion dollars with foreign banks, but this rescheduling was not reflected in the price of its bonds in the global credit market, as the price of sovereign bonds in the US credit market fell to between 35 to 45 cents per dollar. .
This low price that investors are offering to holders of these bonds reflects distrust in the future of the Argentine economy’s recovery, as well as distrust of Buenos Aires’ ability to service its debt in foreign currencies.

The Corona pandemic exacerbates the economic crisis in Argentina, where more than a third of the country’s population of 44 million live below the poverty line. In recent months, the country has witnessed an insane increase in the prices of essential goods, with the inflation rate reaching 40 percent.
Perhaps the inflation rate will continue to rise during this year due to the depreciation of the peso, or until the government reaches a new agreement with the International Monetary Fund. It is an agreement that economists do not expect to happen before next year, because negotiations will start in mid-November.
In spite of the Fund’s keenness to save Argentina from this crisis, the decision of the financial package may take several months, depending on the bureaucratic procedures of international institutions.
Amidst the rapid decline in the peso and the absence of the dollars needed to intervene in the exchange market, the government may resort at any moment to take measures to restrict dealing in foreign exchange. Consequently, panic increases in the market, as investors struggle to protect their wealth from erosion, by buying dollars and foreign currency and saving them in homes. And the Argentine government made such a decision last year.

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