BUENOS AIRES, Argentina
Argentina plans to hold the peso steady against the dollar even after a sharp depreciation of the currency in Brazil raised expectations of devaluation, Economy Minister Axel Kicillof said Thursday.
“If Brazil devalues violently, Argentina has to avoid instability and it can,” Kicillof said during an interview on Radio La Red in Buenos Aires.
Brazil’s currency, the real, fell this week to its lowest level against the dollar in a decade, a 25 percent depreciation since July.
The real’s devaluation has raised concerns that Argentina will have to step up its pace of currency deprecation to avoid losing a competitive edge in export markets against Brazil and a surge in imports from its neighbor.
Kicillof said that while Argentina has devalued its currency by 6 percent since July, when factoring in a more than 20 percent drop in the peso against the dollar in January 2014 that takes the total depreciation to 30 percent since then.
Instead of devaluing, Kicillof said the government must provide “certainty” to sustain consumption and investment.
“There is an enormous economic, currency and financial earthquake in the world right now,” Kicillof said during the 60-minute interview. “But this is a government that whenever there are international problems has tried to fortify the Argentine economy so that events are not repeated in [the country], or at least with the least possible violence.”
Many economists, opposition politicians and executives have suggested that a devaluation of the peso against the dollar will help protect local industry from a rise in imports while also boosting exports.
“Many people are asking for devaluation,” Kicillof said.
But he warned such a move would not be “responsible” as it would spur “instability.”
Kicillof, however, said a slowdown in Brazil’s economy likely will hurt growth in Argentina. For example, he said 60 percent of Argentina’s automotive exports go to Brazil.
The auto sector is already reeling from a local slump – the economy is in a second straight year of recession – and dwindling exports. Vehicle production fell 20 percent in the first two months of 2015 compared with the same period of 2014, according to the Argentine Automakers Association.
During the same period, exports fell 30 percent and domestic sales by 23 percent.
