When Argentine President Mauricio Macri told the country he had asked the International Monetary Fund to speed its disbursement of a $50 billion loan, he consciously aimed to assuage the fears of uneasy market watchers.
"We have seen new expressions of a lack of confidence in the markets, specifically over our financing capacity in 2019," Macri said in a speech posted to Facebook Wednesday, adding: "This decision aims to eliminate any uncertainty."
By Thursday, however, the move appeared to have had just the opposite effect — and Argentine authorities were scrambling to mitigate it.
Argentina's currency, the peso, followed a rough day of trading with a still more dreadful drop when markets opened again Thursday morning. It plummeted 15 percent within minutes and spent the rest of the day hovering at record lows. At one point, a single dollar could buy more than 41 Argentine pesos.
The country's central bank acted quickly in response, raising its benchmark lending rate 15 points, to 60 percent — the highest such rate in the world, according to The Associated Press. The drastic measure intended to bolster the currency's sagging value — and ease fears of a negative trend that has also seen a worrisome inflation rate.
The currency has lost nearly 50 percent of its value since the year began.
The IMF, for its part, has said it's amenable to adjusting the timeline of its loan to Argentina, which was agreed to in May. The managing director of the international banking system, Christine Lagarde, said Wednesday that revisions were warranted in light of "the more adverse international market conditions, which had not been fully anticipated in the original program."
Those inclement conditions are rooted partly on what's going on in the city where the IMF is based, Washington, D.C. It's there that the U.S. banking system, the Federal Reserve, has responded to a strong American economy with a couple of small increases to its own key interest rate in recent months.
"Because the U.S. economy is strengthening, that is having a ripple effect in emerging markets around the world. Many of these countries have borrowed a fair bit in international markets and especially done a lot of this borrowing in dollars when dollar borrowing was cheap," global economist Eswar Prasad of Cornell University told NPR's All Things Considered earlier this month.
"Now," he added, "the chickens are coming home to roost when interest rates in the U.S. are rising, and it's putting pressure on emerging markets around the world."
That includes Argentina — but it is by no means limited to the Latin American country. Currencies in Turkey, South Africa and Indonesia have all suffered to varying extents as the dollar grows stronger and attracts more international investment away from these emerging markets, Prasad says.
Within Argentina, the IMF's support does not necessarily come as welcome news. Many Argentines still blame their country's economic collapse nearly two decades ago on reforms pushed by the international organization. As the BBC observes, "going to the IMF is the most unpopular move a president could make in Argentina."
Lagarde, however, anticipates a far brighter outcome this time around.
"I am confident that the strong commitment and determination of the Argentine authorities will be critical in steering Argentina through the current difficult circumstances," the IMF director said, "and will ultimately strengthen the economy for the benefit of all Argentines."
You won’t find a paywall here. Come as often as you like — we’re not counting. You’ve found a like-minded tribe that cherishes what a free press stands for. If you can spend another couple of minutes making a pledge of as little as $5, you’ll feel like a superhero defending democracy for less than the cost of a month of Netflix.