<\/p>\n<\/p>\n
BUENOS AIRES \u2014 A shopping trip to Miami or a beach vacation in Brazil is far beyond Samuel Rivas\u2019 budget. Nevertheless, the 57-year-old cabdriver was on a desperate hunt for foreign currency Wednesday in the Argentine capital\u2019s financial district.<\/p>\n
\u201cIt\u2019s the only way I can make my money count \u2014 by buying dollars,\u201d Mr. Rivas explained below the red digits flashing the Maguitur exchange office\u2019s current values. \u201cBecause the day I want to trade in my car, if I saved in pesos, it\u2019ll be totally devalued.\u201d<\/p>\n
His strategy \u2014 which has become a near-universal pastime in a country facing a 25 percent annual inflation rate and where everything including real estate and international airfare is priced in U.S. dollars \u2014 has turned into a crisis again in the past two weeks as the Argentine peso lost almost 18 percent of its value against the greenback.<\/p>\n
The frustration on the streets is compounded because many Argentines thought they put such indignities in the rearview mirror with the election of center-right businessman Mauricio Macri as president in late 2015.<\/p>\n
A 2001 government default was followed by 12 years of leftist rule that left Argentina struggling to rebuild its treasury and clean up its reputation in the global financial circle.<\/p>\n
But the return of the currency bears and a sharp rise in the U.S. dollar have left Argentina \u2014 and a number of developing countries including Brazil, Mexico, South Africa and Russia \u2014 reeling again, desperately trying to bolster the value of their currencies without undermining local growth.<\/p>\n
The issue has particular resonance here, with many Argentines talking of a \u201chere we go again\u201d feeling.<\/p>\n
The dollar, worth just short of 21 pesos at the end of April, was selling this week for about 25 pesos. The decline was so steep that it unnerved locals long accustomed to the ever-weakening currency, which was once pegged to U.S. tender. On the day Mr. Macri was elected in December 2015, the dollar was worth barely over 9 pesos.<\/p>\n
It also prompted a frenzied response from central bankers, who sought to prop up the peso by hiking interest rates by almost 13 points, to 40 percent, and by selling off some $9 billion in foreign currency reserves. The peso hit a historic low against the dollar on Monday, although there was faint sign it was firming up by Wednesday.<\/p>\n
With a booming U.S. economy and the Federal Reserve raising interest rates, investor money that flooded into emerging markets such as Argentina is heading back to the U.S., putting huge pressure on countries that failed to prepare.<\/p>\n
Carmen Reinhart, a Harvard economist specializing in international finance, turned heads this week when she told the Bloomberg News service that the emerging market economies are showing \u201cmore cracks now than they did five years ago and certainly at the time of the [2008] global financial crisis.\u201d<\/p>\n
Mr. Macri, under increasing pressure 15 months ahead of a likely re-election bid, has acknowledged the anxiety, though he was quick to declare that the \u201ccurrency turbulence\u201d had been overcome.<\/p>\n
\u201cClearly, what happened this week is that the world has decided that the velocity at which we had committed to reducing the fiscal deficit is not enough,\u201d Mr. Macri told reporters at the Olivos presidential residence on Wednesday. \u201cSo we\u2019ll need to speed things up.\u201d<\/p>\n
The president, a onetime business associate of Donald Trump whose acumen with money was supposed to be one of his strongest assets, has called for a grand bargain with opposition leftist lawmakers, governors and union leaders to further rein in deficit spending, which he insisted was the source of all of Argentina\u2019s financial troubles.<\/p>\n
For all the efforts of Buenos Aires to set its house in order and restore its good credit, recent events have been a sharp reminder of the country\u2019s vulnerability to trends and forces beyond its borders and beyond its control.<\/p>\n
Vulnerable<\/strong><\/p>\n \u201cIt\u2019s a vulnerability because we depend on the world to lend us money, something we must change,\u201d Mr. Macri said. \u201cWe Argentines have dragged along this problem, which weighs down all of society. So I believe it\u2019s time to tell the truth: No more shortcuts, no more patches.\u201d<\/p>\n Those words may well sound ominous to many overwhelmed Argentines who, in the wake of the administration\u2019s cuts to government subsidies, have seen their utility bills and public transport costs triple or quadruple in a matter of months.<\/p>\n Mr. Macri\u2019s May 8 decision to ask the International Monetary Fund for a $30 billion line of credit, ostensibly intended to inspire confidence, seems to have done just the opposite given Argentina\u2019s troubled history with international lenders.<\/p>\n \u201cIt\u2019s a sensitive topic [because] it reminds us \u2026 of somewhat traumatic experiences the country lived through,\u201d said Mariano de Vedia, a political commentator for the La Nacion daily. \u201cThat doesn\u2019t mean the [IMF] negotiations won\u2019t be positive. But there\u2019s an old saying: \u2018He who scalded himself with milk cries when he sees a cow.\u2019\u201d<\/p>\n Popular unease is not enough of a reason to seek financing elsewhere, Mr. Macri insisted, especially because it could mean an additional $1 billion in interest per year.<\/p>\n \u201cThe [IMF] is a serious institution with which one makes good or bad deals; we\u2019ll make a good deal,\u201d Mr. Macri said. \u201cWe\u2019re talking about hundreds of schools we can build, with the [savings] in interest, we\u2019re talking about thousands of miles of freeway. \u2026 This must be a time of pragmatism.\u201d<\/p>\n But to Emilio Massucco, who owns a small electronics store a few blocks from the Maguitur office, there is nothing pragmatic about looking to international powers that be to fix Argentina\u2019s problems.<\/p>\n \u201cI\u2019d like for us to not depend on the dollar,\u201d Mr. Massucco said while sitting in front of a rack adorned by a sizable Argentine flag. \u201cI\u2019d like for the country to be run in a way so as to not depend on the [IMF], of course, not depend on another country\u2019s economy, especially that of the United States.\u201d<\/p>\n While Mr. Macri praised his economic advisers Wednesday, the peso meltdown was affecting the wallets of bargain hunters along Florida Street, the busting Buenos Aires shopping mile where dozens of unlicensed money changers offer their services with their trademark, high-decibel cries of \u201cCambio, cambio.\u201d<\/p>\n \u201cYou see it reflected in the value of a spare part of a cellphone, a tablet, whatever,\u201d said Mr. Massucco, whose store sits inside the street\u2019s Galeria Jardin electronics mall. \u201cBuying from a wholesaler with a 30-day check means exacerbated dollar futures. \u2026 The dollar causes [price] hikes of all kinds.\u201d<\/p>\n A day after the government gained some breathing room by avoiding a feared sell-off of short-term Lebac bonds, the 45-year-old entrepreneur\u2019s confidence in official assurances that the worst is over was limited at best.<\/p>\n \u201cThe market has calmed down, and the Central Bank regulated things in some way,\u201d Mr. Massucco said. \u201cBut even so, there still is latent instability and uncertainty.\u201d<\/p>\n All but certain, though, is that the government\u2019s annual inflation target of 15 percent \u2014 already boosted from the 10 percent estimate \u2014 has become wholly illusory. Unidentified officials warned this week that 20 percent and even 25 percent were more realistic objectives.<\/p>\n Amateur Milton Friedmans<\/strong><\/p>\n The close link to inflation \u2014 and thus the costs of everyday products \u2014 is why ordinary Argentines keep a close eye on dollar values.<\/p>\n At the solidly named Sterling Cafe just five doors down from the Central Bank, Daniel Mendez Garcia sounded more like an economist than a coffee shop co-owner.<\/p>\n \u201cYou know what\u2019s happening? You spend more. You have new price tags and old salaries,\u201d Mr. Mendez said as he chatted with one of his regulars, a retired central banker. \u201cMoney in the street contracts, so there\u2019s less in sales. It\u2019s math; no need to be a guru [like] Milton Friedman.\u201d<\/p>\n Unlike others, the 20-year coffee veteran insisted he won\u2019t preemptively charge his customers more. But in a country with an $8 billion trade deficit, how much the peso is or isn\u2019t worth will still make a difference.<\/p>\n \u201cWe only change the menu prices when they raise prices for me,\u201d Mr. Mendez said. \u201c[But] coffee will get more expensive now because it\u2019s imported. There\u2019s nothing you can do about it.\u201d<\/p>\n In the meantime, halfhearted acknowledgments of errors \u2014 with Central Bank President Federico Sturzenegger conceding that markets were not \u201cconvinced\u201d by his monetary policy and Mr. Macri faulting himself for being \u201ctoo optimistic\u201d \u2014 have done little to tame tempers.<\/p>\n \u201cThe self-criticism helps if you can gain something for the future,\u201d Mr. Mendez said. \u201cOtherwise, you can just commit hara-kiri.\u201d<\/p>\n It\u2019s advice Mr. Macri may want to heed if he wants to remain in office beyond October of next year, especially since voters have already shown an uncharacteristic amount of patience as they await his administration\u2019s long-promised economic revival.<\/p>\n \u201cIn a way, [he] has been weakened; it just so happens that no other sector, party or candidate has tapped into this situation,\u201d said Mr. de Vedia, the La Nacion analyst. \u201cThe [peso crisis] further delays the recovery, and that causes frustration and dissatisfaction.\u201d<\/p>\n If any doubts remain as to just how present American legal tender is on Argentines\u2019 minds, the president might do well do ditch his limousine and take a subway ride around Buenos Aires.<\/p>\n \u201cJust 20 pesos,\u201d a street vendor hawking ballpoint pens yelled on Wednesday in a crowded B line wagon: \u201cIf the dollar keeps rising on me, I don\u2019t know for how much longer I\u2019ll be able to sell them at 20 pesos.\u201d<\/p><\/p>\n","protected":false},"excerpt":{"rendered":" The return of the pesos bears and a sharp rise in the U.S. dollar have left Argentina — and a number of developing countries including Brazil, Mexico, South Africa and Russia — reeling again, desper BUENOS AIRES \u2014 A shopping trip to Miami or a beach vacation in Brazil is far beyond Samuel Rivas\u2019 budget. 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