The Netherlands is playing Argentina in terms of currencies

The economy of Argentina is in such a bad state that you could almost wish the country a success at the World Cup. However, Argentines benefit more from the bold action of a new finance minister than from superstar Lionel Messi.

You wouldn't say it, but when it comes to football, the Netherlands historically has a considerable predominance over Argentina. Of the nine games that both countries played against each other, the Argentines won only one. Unfortunately, that was also by far the most important: the 1978 World Cup final in Buenos Aires. And of the draws, the 0-0 from 2014 is undoubtedly still fresh in most people's memories. Because the South Americans took the subsequent penalties better, Argentina eventually advanced to the World Cup final in neighboring Brazil. On the currency front, however, the euro is very far behind the peso.

All balls on Mass
Over the past twelve months, the Argentine peso has fallen by 36%. Over a period of ten years, that damage even amounts to more than 95%. The enormous weakness of the peso is largely due to the economic malaise in Argentina. According to central bank polls, inflation could even exceed 100% this month. Usually, a final victory at the World Cup provides a temporary economic boost. But in this case, the country probably benefits more from Massa than from Messi. Lawyer Sergio Massa became the third finance minister at the beginning of August. For the time being, he is more decisive in that role than his predecessors.

Nice money printing
Massa says he is committed to curbing government spending. That is much needed. The money supply is growing rapidly, because the government has a habit of closing deficits by printing new pesos. Massa aims to reduce the budget deficit to 2,5% this year and 1,9% in 2023. In doing so, he is sending a clear signal not only at home, but also internationally. The IMF quickly picked up on that signal. In early October, it was announced that the organization would release a $3,8 billion bailout package. But even with his buoyant fiscal policy and IMF backing, Massa still has a long way to go. Argentines are still trying in all kinds of ways to exchange rapidly depreciating pesos for more stable dollars.

Is this the end of the Qatar dollar?
To prevent this, the country has introduced all kinds of measures to make it more difficult to exchange money. In addition, the central bank has set up a whole system to devalue the currency by sector. In Argentina, for example, there are soybean dollars for soybean export revenues, tech dollars for technology companies doing business across the border, and even Coldplay dollars to buy tickets to international shows, such as British band Coldplay's tour. There is also currently a Qatar dollar. This is used to levy a relatively large amount of tax on credit card payments from Argentinian tourists abroad. For the Dutch national team it is hoped that they will no longer need that Qatar dollar after tomorrow evening.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.