Argentina’s output falls in July, cabinet launches favourable dollar rate for oil, gas exporters

Jonathan Lopez

28-Sep-2023

SAO PAULO (ICIS)–Argentina’s economic output fell by 1.3% in July, year on year, but posted an increase of 2.4% compared with June, the country’s statistics office Indec said this week.

Agriculture, still reeling from a historic drought which hit Argentina’s grain exports hard, and manufacturing posted falls in output in July, year on year, of 14.0% and 3.7%, respectively.

Month on month, however, economic activity rose by 2.4%.

July’s economic indicators come after Indec confirmed earlier this month the economy contracted by 4.9% in the second quarter, year on year.

CRUDE DOLLAR
While Argentina’s economic woes continue rising the Argentinian government launched this week the ‘Vaca Muerta dollar’ to let the country’s key oil sector enjoy more favourable peso exchange rates for the next two months.

Vaca Muerta is Argentina’s vast oil and gas field in Patagonia.

With the measure, the state would also increase its revenue by around $1.2bn, according to Argentina’s economy minister, Sergio Massa, as the country is in dire need of dollar reserves.

The experiment would follow the example of the ‘soy dollar’, which also allowed agricultural exporters to have more favourable exchange rates.

With inflation running at nearly 125%, Argentina has tight control of the official exchange rates, but it can also favour certain economic sectors.

For the next two months, oil and gas exporters will be able to exchange 25% of the value of their exports using the cryptocurrency CYCLEAN (CCL) exchange rate to convert their dollars into pesos.

The CCL rate offers the oil sector about 763 pesos per dollar, or more than double the value of the official rate, which stands at around 350 pesos per greenback.

“We made the decision to recognise 25% of what [energy companies] export and bring to Argentina to invest using the CCL value so that they increase investment levels over the next 60 days in the oil and gas sector,” said Massa.

The economy minister is also the candidate of the governing party for the general election on 22 October, but open primaries held in August showed his chances to renew mandate are slim, with opposition candidates performing strongly.

The new government-mandated favourable dollar rate adds up to a long and maddening list of informal dollar rates currently circulating in Argentina; financial daily Ambito Financiero keeps daily track of them here.

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