Argentine lessons

On January 31, the Central Bank of Argentina spent a record amount for Latin America - $ 1.25 billion! - to support the exchange rate of the national currency - the peso. Did not help

The country has only $28.3 billion left in its gold and foreign exchange bins, while in 2011 it was $52.6 billion. In the last week alone, the peso has fallen by almost 15% to 8.01 for $1 - at least in the last 12 years. If this momentum continues, President Cristina Fernández de Kirchner's efforts to prevent a severe economic downturn and curb inflation will go to waste.

In Russia, far from Argentina, something similar is happening today - the ruble and peso have become “record holders” in terms of free fall rates . So let's look at the Argentine experience.

At the beginning of the year, the Central Bank of Argentina stopped foreign exchange interventions, and the peso collapsed by 34% within a few days. Most experts believe that there are two reasons for the sharp depreciation of the Argentinean currency. One refers to the unfavorable international trend for all currencies of developing countries - the US Federal Reserve has reduced the speed of the printing press, the era of the cheap dollar has come to an end, and investors have again turned their faces to the world's main reserve currency. But the main reason is not external, but internal. Gabriel Oddone, a professor of economics at the University of Uruguay, believes that "in Argentina, distrust of the population in the economic and financial policies of the authorities is rapidly growing, the government is losing the political support of citizens."

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"Populist fiscal policy will lead Argentina to collapse." Does this verdict remind you of anything?

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The flight of foreign capital from Argentina is becoming threatening. According to the Spanish newspaper El Pais, the real inflation in the country is 25% - 15% more than the government says.

In the first half of the 2000s, the Argentine economy developed steadily. The country's success was based primarily on high prices for Argentinean exports, which were in high demand on the world market. However, this "manna from heaven", sent down to Argentina, was used extremely carelessly. The package of social benefits in a short period swelled six times, the number of officials increased by 22%, dozens of new absolutely inefficient state enterprises were created, and draconian measures were taken to use foreign currency. “In today's Argentina, we are dealing with a “protective” model of political and economic development,” says the well-known Chilean economist Eduardo Engel. - The government can only rely on the stability of prices for the main items of Argentinean exports and the stability of the world oil market. Otherwise, populist fiscal policies and lack of strategic planning will inevitably lead Argentina to collapse.”

Does this verdict remind you of anything?

Today, tens of thousands of Argentines are besieging currency exchange offices in an attempt to buy dollars. But the government has imposed severe restrictions on official "exchangers": Argentines earning over $900 a month can only buy 2,000 "green" coins from them every month. Quite possibly, a little more - and a similar practice will be adopted in Russia. But what about populism and the lack of "strategic planning"?