BUENOS AIRES (Dow Jones)–Central Bank of Argentina President Mercedes Marco del Pont said Wednesday that the recent jump in a measure of capital flight should start to ease in the fourth quarter after general elections.
«It accelerated in the third quarter. We expect this to be a trend that will probably manifest itself until October and slow down in the last quarter of the year,» she told reporters at the sidelines of a conference.
The formation of assets abroad by the nonfinancial private sector rose to $6.13 billion in the second quarter, from $3.68 billion in the first quarter and $2.24 billion in the fourth quarter of 2010, according to the central bank.
Argentines frequently turn to the U.S. dollar during an election year and 2011 is proving to be no exception.
Argentina President Cristina Kirchner is widely expected to win a second term in October after she received nearly 51% of the vote in a national primary election held earlier this month.
Kirchner’s interventionist economic policies have fostered high rates of economic growth and an expansion in industry, but at the cost of what most economists say is annual inflation above 20%.
The central bank regularly intervenes in the foreign-exchange markets to engineer a gradual depreciation of the peso versus the dollar to control inflation and help exporters.
The peso was quoted on the MAE local foreign-exchange wholesale market closing at ARS4.1995 per dollar on Wednesday, bringing its year-to-date loss versus the dollar to 5.3%. The government has pledged an average exchange rate of around ARS4.10 per dollar in 2011.
But double-digit gains in consumer prices have caused the peso to appreciate in inflation-adjusted terms against the greenback. At the same time, unions have won annual salary increases that are thought to exceed inflation.
Goldman Sachs expects that the 25% increase in Argentina’s minimum wage announced last week likely will contribute to consumer-price inflation of around 20% in 2012 and put pressure on the authorities to depreciate the peso at a faster pace after the election.
The central bank will continue its managed float of the peso after October to dispel any doubts «that following the elections there will be an exchange-rate adjustment, which isn’t going to happen,» Marco del Pont said.
«The exchange rate today is competitive in terms of the country’s [international] insertion as an exporter» of industrial goods, she added.
Source: online.wsj.com