Economy Sinking, Argentina Lets Its Currency Float

Argentina’s battered currency was left to float against the dollar for the first time in 30 years Wednesday after the economy minister declared the state virtually broke.

Argentina had struggled to support its currency, the austral, which has lost nearly half its value in a whirl of hyper-inflation since Economy Minister Juan Carlos Pugliese took office a month ago.

The austral opened Wednesday at 79 to the dollar. It was worth 17 to the dollar in February.

In a speech to the nation Tuesday night, less than two weeks before national elections, Pugliese explained the reasons for the first fully free flotation of Argentina’s currency since 1958, a price freeze and other emergency measures announced over a five-day exchange holiday.

He said the government had chosen a path that “will not commit a single dollar of our (foreign) reserves” in trying to support the austral and “allows us to have confidence that the exchange market will normalize.

“Some of these decisions entail a great fiscal effort for an exhausted state with no financial capacity,” he said.

Military and civilian governments alike since 1958 have kept a succession of national currencies under varying degrees of state control.

A government-set limit of 500,000 australes (about $6,300) for cash withdrawals from banks remained in force Wednesday because the Federal Mint, despite 24-hour shifts over the weekend, was unable to replenish the supply of bills.

Although official inflation figures are due out next week, officials and private analysts say the cost of living rose by 35% to 40% during April alone.

Inflation during May is expected to top 40% despite a broad price freeze announced this week, analysts say.