Following the purchase of US$100 million, the Argentine Central Bank foreign currency reserves reached US$50.604 billion, US$87 million up compared to the previous record in May 28. However, it will be a short-term record. Within the next three weeks, the government is to meet the Boden 2012 bond maturity payment totalling US$2.3 billion.
In the last few weeks, the Central Bank sped up the American dollars purchase process so as to face the following payment and absorb its impact on the foreign currency reserves. But this strategy also implies a long term explanation: the government is set to use Central Bank foreign reserves to service public debt in 2011, repeating the process carried out in the current year.
Central Bank Governor Mercedes Marcó del Pont said that the accumulated foreign reserves "are also genuine funds, since they were originated in Argentina's trade surplus. They are not the outcome of external debt."
Capital flight
If the trade surplus had been the only explanation for the accumulated volume of foreign currency reserves, the latter would have increased by more than US$35 billion in the last two years and a half, considering the balance of trade has totalled US$13.1 billion in 2008, US$16.9 billion in 2009, and US$6.1 so far in 2010.
However, this significant balance of trade isn't reflected in the volume of Central Bank foreign reserves. Why not? Mainly due to the flight capital triggered by the investors' distrust in Argentina since the farming conflict burst out between the government and the agricultural sector. The use of Central Bank foreign currency reserves to pay US$3 billion has also played a significant role in this situation.
This "foreign assets formation" has decreased in the last few months, but it still remains. Soybean dollars' influence was more significant, especially since May.
Since she took office, Central Bank governor Mercedes Marcó del Pont has managed to sell the lowest amount of American dollars and also carried out an aggressive strategy when it came to purchase US dollars. However, the surplus hasn't affected the current exchange rate, which stands at ARG$3.95, following the estimates predicted in the 2010 Budget.
By Pablo Wende for Ambito.com
Translated by Jimena Gibert
Source: http://www.ambito.com/noticia.asp?id=532626
