December 18, 2015

hISTORY eNDS EVERYWHERE:

Argentina's economy just got a 7-day makeover (Patrick Gillespie, 12/18/15, CNNMoney)

In the first seven days of his presidency, here's what Macri has done:

1. Lifted currency controls [...]

A mostly fixed exchanged rate caused the peso to become deeply overvalued. Until Thursday, the peso was worth about 9.8 pesos to the dollar.

Once the controls were lifted Thursday, the peso tanked 26% to 14.5 pesos to the dollar.

The move has risks. It can case the peso to lose too much value and spark even more inflation.

However, the currency manipulation discouraged foreigners from investing in Argentina. And the country badly needs foreign cash. Last month, American Airlines announced it wouldn't accept pesos, partially due to how overvalued the peso was.

2. New central bank president

Macri's party appointed Federico Sturzenegger, a U.S. trained economist, to lead the central bank.

Sturzenegger needs to encourage foreign investors to come back. Quickly.

Argentina's central bank has seen its foreign reserves plummet in recent years due to debt payments and inflation. Reserves peaked over $50 billion in 2011, but have since fallen to $24 billion, according to the central bank.

3. Tax cuts

Macri cut personal income taxes and lifted taxes on exports to help stimulate trade and spending.

Kirchner had implemented the export tax and outraged farmers in Argentina. 

Posted by at December 18, 2015 12:22 PM

  

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