Argentine peso plummets 26.5 percent after controls lifted

23 Dec 2015 | Author: | No comments yet »

Argentina’s peso tumbles after government lifts dollar limits.

That represents about a 30 percent drop in value from the 9.84 official rate at the close of business Wednesday. Argentina’s currency sharply devalued against the U.S. dollar on Thursday as the new administration lifted deeply unpopular limits on the buying of foreign currencies, a major change that will expose Latin America’s third-largest economy to international market forces in ways not seen in more than a decade.Argentina’s finance minister declared the first day of a free-floating peso a success, saying its decline was in line with his expectations and showed there’s no outsize demand for dollars in the country.The end of currency controls and the ensuing peso collapse of as much as 30 percent on Thursday signal lower U.S. dollar costs for foreign miners including Goldcorp Inc., Glencore Plc, Barrick Gold Corp. and AngloGold Ashanti Ltd.

The devaluation, widely expected by economists and even frequently hinted at by new President Mauricio Marci, could exacerbate already soaring prices and spook Argentines, who fear big changes to an economy that has suffered periodic financial meltdowns. The change was put in motion Wednesday night when Finance Minister Alfonso Prat-Gay announced there would no longer be restrictions on buying foreign currencies. Minutes after exchange houses and banks opened Thursday, the peso initially traded at around 15 to one U.S. dollar before dropping to 13.95 by the end of the day.

Goldcorp’s assets in Argentina include a 37.5 percent stake in the Glencore- controlled Alumbrera mine and its Cerro Negro mine, with the latter expected to produce 425,000 to 475,000 ounces of gold this year. People who wanted to buy dollars, a common practice in a South American country with a long history of financial collapses, had to meet several requirements. The central bank didn’t intervene in the currency market and more than $300 million of open bids were left for tomorrow, the monetary authority said in an e-mailed statement. Companies operating mines in Argentina probably will see an almost immediate benefit from a weaker peso, according to Andrew Kaip, an analyst with BMO Capital Markets in Toronto. “We will see a pretty quick impact on their numbers: a quarter delay, in that range,” he said by phone.

Locally called a “cepo,” or “clamp,” the restrictions were one of many protectionist policies instituted during 12 years of governments led by Fernandez and her late husband and predecessor as president, Nestor Kirchner. However, with inflation estimated at 25 percent, workers will likely demand higher wages and that would erode the benefit, he said. “Your cost structure has gone down but you still have to go in and negotiate wage settlement,” Kaip said. “Typically, that takes place early in the second quarter.” Goldcorp’s Jeannes declined to comment on wage expectations, saying discussions are confidential. Although the Fernández administration insisted that dollars coming into the country trade at the official rate, getting dollars out at that rate, if at all, proved difficult. International Monetary Fund chief Christine Lagarde has been ordered to face trial for “negligence” in relation to a settlement the French government reached with businessman Bernard Tapie during Lagarde’s time as finance minister, a French court said Thursday.

Economic growth, which has been largely stagnant the past four years, is expected to expand 0.6 percent in 2016 before jumping 3.6 percent the following year, according to the median estimate of 20 economists surveyed by Bloomberg. Industries from textiles to agriculture to commercial banks all had different rates, and businesses as well as individuals often traded in illegal exchange houses that were an open secret. “The cepo was the worst possible thing the last government could have done,” said Daniel Romano, a 57-year-old doctor who stopped by a bank in Buenos Aires to check the rate. “Sure, there is a devaluation today. Vale SA, the world’s biggest iron ore producer, decided to halt its $5.9 billion potash project in Argentina after the country implemented the currency control policy.

The company said in 2013 that the cost to develop the mine in Mendoza almost doubled to near $11 billion because of inflation and exchange- rate fluctuations. The trial concerns Lagarde’s 2008 decision to allow an arbitration process to end a dispute between Tapie, a supporter of then-President Nicolas Sarkozy, and former state-owned bank Credit Lyonnais. Between the time Macri was elected on Nov. 22 and his inauguration last week, many businesses jacked up prices in hopes of protecting themselves against any devaluation.

The government struck an accord with grain exporters to bring in $400 million a day for the next three weeks and expects to raise more than $5 billion in financing from banks who will purchase a central bank note, Prat-Gay said on Wednesday. At the fund’s annual meeting in October, Lagarde said she would be open to serving another term. ● AstraZeneca has agreed to buy 55 percent of the privately held biotech firm Acerta Pharma for $4 billion to give it access to a new kind of blood cancer drug, boosting its long-term growth at the cost of a near-term hit to earnings.

The deal gives AstraZeneca chief executive Pascal Soriot a promising new medicine as he seeks to bolster investors’ confidence after having turned down a takeover bid from Pfizer. ● Federal health officials have cleared a wearable heart-zapping device for children at risk of deadly irregular heartbeats. The tracking of the black market rate had become an obsession in the country with its value displayed prominently on television news programs and on front pages of the country’s main newspapers.

The company also announced that it hired Tor Myhren from the advertising company Grey Group to be vice president of marketing communications. ● Facebook is trying to make it easier to send photos as the holiday season’s picture-taking frenzy escalates, offering a feature called “Photo Magic” that will automatically address a message so it can be sent quickly to Facebook friends identified in a picture.

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