AP – Antonela Massarelli desperately needed a front door for the new house she and her family will move into in a Buenos Aires suburb.
The 29-year-old mother of two said she found one prospect in the morning at about ARS20,000, but noted with exasperation that the price went up by afternoon to more than 30,000.
And store owners – faced with potentially higher costs to replace doors the next day – mostly wanted to hold onto their merchandise.
“They didn’t want to sell,” she said. “I went to a lot of places and they were closing, they said, ‘I can’t sell to you’, ‘I can’t sell to you’ and the doors they did want to sell were of a really crappy material.”
Her eventual purchase, at ARS31,900, amounted to USD65 at black-market rates, USD144 at the official rate.
Massarelli’s struggle with the door reflected the uncertainty in Argentina as its currency has sharply depreciated over the past week in the informal market, raising fresh questions about the fragility of the Argentinian economy ahead of October presidential elections.
Since early last week, the peso in the informal market – known as the “blue” dollar rate – has depreciated around 20 per cent, reaching a high of ARS495 to the USD on Tuesday, increasing the spread with the official rate to around 120 per cent.
The peso strengthened slightly on Wednesday although the market remained “very volatile,” according to a currency dealer in Buenos Aires who declined to be identified because his work is technically illegal. Stringent capital controls mean that access to the official foreign exchange market is extremely limited, so parallel rates have flourished.
“The spread is an indicator of uncertainty,” said Chief Economist Gabriel Caamaño at Consultora Ledesma, a local consultancy. “With this level of spread, it’s difficult for the economy to function.”
Massarelli lived this first-hand that day as she sought supplies for her house in the Lomas de Zamora suburb. As the peso depreciated, many stores simply closed.
She managed to get into one store right as it was closing.
“They wanted to sell me a simple metal door for ARS80,000, and the owners were telling me that they couldn’t sell me anything for less because they didn’t know how much it was going to cost tomorrow,” Massarelli said.
Finally, Massarelli went back to a seller who had offered her a door for ARS19,900 in the morning.
“When I said yes, at two in the afternoon, he told me it had increased to ARS31,900,” Massarelli said.
“I didn’t have a choice, it’s not that I have money to spare but I need a door and tomorrow it’s going to be more expensive and the day after it would be even more expensive.”
“The economy is grinding to a halt,” said Chief Strategist Walter Stoeppelwerth at Gletir Corredor de Bolsa, a brokerage based in neighbouring Uruguay.
“You’re not going to let the inventory go because you don’t know how much it’s going to cost to replace that inventory,” Stoeppelwerth said, noting that around 45 per cent of inputs used for manufacturing are imported.
The country is in a vicious circle. Analysts agree the rapid depreciation of the peso is in part due to the surprisingly high monthly inflation of 7.7 per cent in March, which took the annual rate to a whopping 104 per cent.
And the rapid depreciation of the currency is in turn driving a further surge in prices, leading analysts predicting April’s inflation number could reach as high as 10 per cent.
“We’re at the cusp of a sort of modern day hyperinflation” that could see annual inflation rate reach 150 per cent, Stoeppelwerth said.
For Caamaño, the currency’s plunge is a reflection of how Argentina’s economy “is held together by a shoestring” with several unsustainable patchwork measures that seem designed with the electoral calendar in mind. “On top of everything there is a big political crisis in the two most important political spaces,” Caamaño added, noting there’s infighting in both the ruling administration of President Alberto Fernández and the main opposition coalition.
“In the economic and political realms, there are no stable anchors to hold onto,” Caamaño said. People therefore seek refuge in dollars.
Although everyone seemingly agrees the official peso is overvalued, the government appears unwilling to pay the political price of an official devaluation so close to an election.
After days of silence, Economy Minister Sergio Massa vowed on Tuesday that the government would “use all the tools of the state to get this situation under control”, which the president blamed on political opponents.
“At some point, the right wing should prioritise the interests of Argentina over their own business and political interests,” said Fernández, who announced earlier this month he would not be running for re-election.
Massa said the government will renegotiate aspects of the agreement signed in 2022 with the International Monetary Fund to restructure some USD44 billion in debt taken by the centre-right government of Mauricio Macri (2015-2019).
Massa also said alleged deliberate destabilisation of the currency would be investigated.
Massarelli was able to buy her door but a sudden jump in the price of materials for a roof – from ARS140,000 to ARS220,000 – meant the family could no longer afford bathroom fixtures.
“So, we’re going to move into a house that doesn’t have electricity, doesn’t have gas, doesn’t have water, doesn’t have floors, only cement – with two small children,” she said.
