On the surface, the pace of decline in the Argentinean peso has been stable, with the currency dropping from Ps4.92/US$ at the end of 2012 to Ps5.23/US$ on our survey date. However, according to latest reported figures, the peso changes hands at almost half the official value in the black market, at around Ps10.0/US$. The currency has, of course, been undermined by persistently high inflation, which stood at 24.5% (y-o-y) in March, according to estimates of its true value in our sister publication Latin America Consensus Forecasts, more than double the official INDEC-reported figure of 10.6%. Investor sentiment has also been depressed by the inward-looking government policies. Speculation of a devaluation of the peso has intensified in recent weeks due to the imbalance between the real and official exchange rates. President Christina Kirchner has been quick to rebuke the idea of a downward currency correction, arguing that it would only favour exporters and hurt the poor. Yet this has failed to quell rumours of such a move due to the difficult economic backdrop and uncertainty about a US court ruling over the country’s debt repayments. The country has announced a sweeping tax amnesty for undeclared dollars in the hopes of bringing money back into the system to replenish its foreign currency reserves (it banned the purchase of dollars for savings almost a year ago to stem capital flight). However, former central bank chief Rodolfo Rossi has indicated that these measures are unlikely to have much effect on currency trends.
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