Argentina takes steps to increase the dollar and takes a key position.
(Bloomberg) — Argentina’s central bank said payment intermediaries must allow debit card transactions in U.S. currency by Feb. 28, a key step in President Javier Millay’s pledge to dollarize the economy.
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The bank has developed a program that allows people to pay loaded fees in dollars or pesos. The move “aims to strengthen currency competition to enable people and businesses to use the currency they need in their day-to-day transactions,” the central bank said in a statement on Thursday.
Separately, the bank on Thursday kept interest rates at 32%, upsetting investors’ bets on rising borrowing costs, according to a person with direct knowledge of the matter. Bloomberg Line reported the key rate news earlier this Thursday.
Financial markets had expected a rate cut in December after annual inflation slowed and the central bank decided to cut its official monthly rate of currency depreciation from 2 percent to 1 percent.
Starting Friday, businesses will be able to post price tags for goods and services in dollars or another foreign currency — with peso rates, Economy Minister Luis Caputo said in a post on X.
During his presidential campaign, Milley promised to encourage currency competition in South America’s second-largest economy, a plan widely known as “dollarization.” The proposal has drawn criticism from opponents as it is seen as unfeasible given the lack of greenbacks. Still, Thursday’s announcement points in the direction of Miley’s promise.
Argentina still maintains a number of capital and currency controls. Milley has pledged to lift those restrictions this year, a move that could force the central bank to offer more attractive interest rates in order to stem the flow of the currency.
The International Monetary Fund, which hopes to lend Argentina more money to help deregulate, has been supportive of borrowing costs above inflation.
Government data released Tuesday showed prices rose 2.7% in December from November, the third straight month below 3% and in line with the average estimate of economists surveyed by Bloomberg. Annual inflation slowed to 117.8%, down from a peak of 300% last year.
