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President Mauricio Macri of Argentina, who rose to power with bold promises to revamp the nation’s economy, is starting to try the patience of global investors.

More than two years into his efforts to revive South America’s second-largest economy, his government is suddenly being tested by an abrupt decline in the nation’s currency, the peso.

Behind the weakness is growing concern that the center-right leader is dragging his feet on some painful, deeper reforms -- and that both inflation and government spending are spiraling dangerously high.

For the second[1] time in less than a week, the central bank on Thursday moved to shore up the peso, to little effect. The currency weakened 7.8 percent against the dollar even as the central bank raised its benchmark interest rate by 300 basis points to 33.25 percent, the highest in the world, on top of Friday’s 3 percentage point increase. The development underscores the challenges facing Macri as he attempts to improve the economy and roll back protectionist measures put in place by his predecessor, Cristina Fernandez de Kirchner.

“Investors gave Macri about a year and a half of a grace period to put the house in order. After that they started to worry,” said Claudio Loser, founding member and director of Centennial Group Latin America and a former head of the International Monetary Fund’s operations in the Western Hemisphere. “Now that the fiscal adjustment remains weak, inflation unwavering, and U.S. bonds more attractive, investors are evidently losing their patience.”

image

A pedestrian passes in front of the Buenos Aires Stock Exchange.

Photographer: Erica Canepa/Bloomberg

After the second increase Thursday, investors indicated it still wasn’t enough, sending the peso to a fresh record low of...

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