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Argentina to Sell Dollars on Parallel Market as Part of Anti-inflation Drive

Argentina's President Javier Milei attends an event commemorating the 208th anniversary of the country's independence from Spain in 1816, in Buenos Aires, Argentina July 9, 2024. REUTERS/Matias Baglietto
Argentina's President Javier Milei attends an event commemorating the 208th anniversary of the country's independence from Spain in 1816, in Buenos Aires, Argentina July 9, 2024. REUTERS/Matias Baglietto
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Argentina to Sell Dollars on Parallel Market as Part of Anti-inflation Drive

Argentina's President Javier Milei attends an event commemorating the 208th anniversary of the country's independence from Spain in 1816, in Buenos Aires, Argentina July 9, 2024. REUTERS/Matias Baglietto
Argentina's President Javier Milei attends an event commemorating the 208th anniversary of the country's independence from Spain in 1816, in Buenos Aires, Argentina July 9, 2024. REUTERS/Matias Baglietto

Argentina's central bank will start selling US dollars in the country's parallel foreign exchange markets in an effort to combat inflation and freeze the country's money supply, the government said.
Economy Minister Luis Caputo announced the new strategy on messaging platform X on Saturday, saying it would "contribute to deepening the disinflation process."
Starting Monday, when Argentina's central bank issues pesos to buy US dollars on the formal exchange market, the bank will effectively balance Argentina's monetary base by selling an equivalent amount of dollars on the parallel "CCL" exchange market, Reuters quoted Caputo as saying.
"There are no more pesos printed in Argentina by any means. It is a historic novelty," Caputo later said in a radio interview. "We were beating inflation by (a few) points and this is the 'knock out' blow," the minister added.
The announcement comes after official data published on Friday showed a five-month streak of slowing inflation ended in June when monthly inflation came in higher than in May.
The strategy outlined by the government of President Javier Milei aims to stabilize the money supply, bring down inflation and help close the widening gap between Argentina's official and parallel exchange rates traded in financial markets.
The South American country's peso has been sliding since the beginning of the year in parallel markets, which for years has diverged sharply from the official rate due to strict currency controls.
At Friday's close, the official exchange rate traded at 919.5 pesos per dollar, while the so-called "CCL" rate traded at 1,416.2 pesos per dollar. Meanwhile, the widely-used black market "blue" rate weakened to a historic low of 1,500 pesos per dollar on Friday.
Milei celebrated Saturday's announcement from the sidelines of the Sun Valley Conference, investment bank Allen & Co's annual invitation-only gathering in Sun Valley, Idaho, where the president and Caputo are courting investors.
"The monetary base in Argentina is no longer increasing, and this is tremendously powerful news," Milei said during a phone interview with Argentine news channel LN+, adding that the plan would "accelerate the deflation process in the economy."
Since Milei took power late last year, inflation has slowed dramatically in Argentina, decelerating from 25.5% in December to 4.2% in May. June's figure was 4.6%.

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Chinese Officials Expect Bumpy Ride for Economy

A woman holding a Chinese flag walks along a street in Beijing, China, 19 July 2024. EPA/ANDRES MARTINEZ CASARES
A woman holding a Chinese flag walks along a street in Beijing, China, 19 July 2024. EPA/ANDRES MARTINEZ CASARES
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Chinese Officials Expect Bumpy Ride for Economy

A woman holding a Chinese flag walks along a street in Beijing, China, 19 July 2024. EPA/ANDRES MARTINEZ CASARES
A woman holding a Chinese flag walks along a street in Beijing, China, 19 July 2024. EPA/ANDRES MARTINEZ CASARES

Chinese officials acknowledged on Friday the sweeping list of economic goals re-emphasised at the end of a key Communist Party meeting this week contained "many complex contradictions," pointing to a bumpy road ahead for policy implementation.
Pressure for deep changes in how the world's second-largest economy functions has risen this year, with consumer and business sentiment near record lows domestically, and global leaders increasingly concerned with China's export dominance, Reuters reported.
Following a four-day, closed-doors meeting led by President Xi Jinping, which takes place once in roughly five years, officials made a raft of seemingly contradictory pledges, from modernizing the industrial complex while also expanding domestic demand to stimulating growth and simultaneously curbing debt risks.
The initial summary of the meeting, known as plenum, did not contain details on how Beijing plans to resolve the tensions between policy goals, such as how to get consumers to spend more while resources flow primarily to producers and infrastructure.
Concerns are growing that without a structural shift that gives consumers a greater role in the economy, debt will continue to outpace growth in order to finance Beijing's industrial modernization and global prominence goals.
That raises the stakes. Some analysts warn the current path fuels risks of a prolonged period of near-stagnation and persistent deflation threats as seen in Japan since the 1990s.
"High debt levels plus increasing deflationary pressures eventually could result in a Japan-style ... low growth and very low inflation," said Julian Evans-Pritchard, head of China economics at Capital Economics.
"That, I think, would force them to change course on their current policies. But that might not happen straight away. That might only happen in a few years’ time."
Contradictions in Chinese policy efforts have been present for decades, as were goals to increase manufacturing value added, enhance social security, liberalize land use and improve local government tax revenues.
But making tough choices is an increasingly urgent task. China grew at a slower than expected pace in the second quarter, leaning hard on industrial output and external demand, but showing persistent domestic weakness.
Speaking at a media briefing on Friday along with other Party officials, Tang Fangyu, deputy director of the central committee's policy research office, acknowledged the challenges.
"The deeper the reform goes, the more complex and acute the conflicts of interest it touches," Tang said.
"Pushing forward Chinese-style modernization faces many complex conflicts and problems, and we must overcome multiple difficulties and obstructions."
The European Union Chamber of Commerce in China said it was "positive that China’s leadership has again acknowledged many of the headwinds facing the country’s economy," but noted the outcome was largely "a reiteration of points."
"There appears to be no deviation from (China's) immediate priority, which is to balance its economic recovery against national security concerns, while maintaining social stability."

China is expected to publish a document with more detailed policy plans in the coming days.
But the fact that the initial post-plenum announcement borrowed heavily from China's existing playbook disappointed some economists.
“Nothing new under the sun: the same industrial policies, the same sense of things," said Alicia Garcia Herrero, chief economist Asia-Pacific at Natixis.
"Really no change in direction, no consumption-led growth, nothing. No sentence on the power of market forces, nothing. So, it’s really disappointing.”
Chinese stocks, not far above the five-year lows hit at the start of 2024, were flat on Friday, suggesting the plenum did little to improve sentiment.