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>> For Reuters, I'm Hugh Bronstein in Buenos Aires. Buenos Aires is having a tough time economically. It started the year on a good note after the president won a resounding victory in mid-term elections in October of last year. But since then, the peso has fallen out of bed and we're looking at a very tough end of the year.
Earlier this year, the market became concerned that not enough foreign investment was coming into Argentina to justify the amount of short-term debt that the central bank was issuing. So when external investors stopped buying that debt, the President, Mauricio Macri, who was elected in 2015, had to go to the International Monetary Fund for help.
He secured in June a $50 billion standby financing deal. But since then, the peso has fallen out of bed, he had to go back to the IMF to renegotiate the deal. It's now worth 57 billion and it includes tougher fiscal measures that are gonna be very difficult to get through Congress.
The renegotiated IMF deal helped to support the peso this week. It's up 8.25% to 38 per $1, but it remains 51% weaker than when it started against the dollar at the beginning of year. One of the things that the central bank is doing to help support the peso is that it's issuing short-term debt, called Le Lis.
That debt is being used to mop up excess peso liquidity that would otherwise be put towards safe haven US dollars. But there's a problem. The Le Lis carry an interest rate of 70%, which of course is unsustainable over the long term. Which is one of the reasons why a recent poll by Reuters had to forecast that the peso is going to fall another 19% over the 12 months ahead, which would put it at 47 per US dollar.
The inflation rate in Argentina is one of the highest in the world. It's expected by the market to end at over 44% this year. With Christmas approaching and with the President trying for reelection next year, that's a very tough scenario going into the end of this year.