BY PETER PRENGAMAN
The Associated Press
BUENOS AIRES, Argentina – Argentina’s currency sharply devalued against the U.S. dollar on Thursday as the new administration lifted deeply unpopular limits on the buying of foreign currencies, a major change that will expose Latin America’s third largest economy to international market forces in ways not seen in over a decade.
The devaluation, widely expected by economists and even frequently hinted at by new President Mauricio Macri, could exacerbate already soaring prices and spook Argentines, who fear big changes to an economy that has suffered through periodic financial meltdowns.
Minutes after exchange houses and banks opened Thursday, the peso initially traded at around 15 to 1 U.S. dollar before dropping to 14.20 in the early afternoon.
That represents a 31 percent drop in value from the 9.84 official rate at the close of business Wednesday. Over the last year, the government has kept the rate fixed around 9.
The change was put in motion Wednesday night, when Finance Minister Alfonso Prat-Gay announced there would no longer be restrictions on buying foreign currencies. Macri had campaigned on promises to lift the restrictions, saying they hurt businesses at home and scared away would-be international investors.
Attempting to stop capital flight, the preceding administration of President Cristina Fernandez instituted the restrictions on buying foreign currency in 2011. Locally called a “cepo,” or “clamp,” the restrictions were one of many protectionist policies instituted during 12 years of governments led by Fernandez and her late husband and predecessor as president, Nestor Kirchner.
People who wanted to buy dollars, a common practice in a South American country with a long history of financial collapses, had to meet several requirements. And most were limited to a few hundred dollars a month — when U.S. currency was available in banks.
Businesses, especially those needing to deal in dollars, were deeply affected.