Argentina awaits IMF 'mercy mission'

Some bank branches had queues of 2,000 by dawn

Argentina, struggling to stem a fall in its currency, has revealed talks with the International Monetary Fund over restarting much-needed aid.

An IMF mission is to visit Argentina from 1-17 April, the country's economy ministry said.

Argentine finance chiefs are to use the visit to discuss the resumption of a $10bn aid programme badly needed to help stabilise South America's third-ranking economy.

Observers said the money could also help inspire other international lenders to look anew at Argentina.

Exchange ceiling

The announcement followed the end of the latest battle to stop a currency slide which on Monday prompted Argentina's central bank to impose exchange controls.

The central bank banned foreign exchange traders and banks from buying dollars from it at the market rate.

Some controls were eased on Tuesday, with a ceiling of $1,000 on dollar-denominated withdrawals raised to $10,000.

While other measures to support the currency remained in place, and riot police guarded some bank branches, the peso strengthened for the first time in seven days, closing at mid-market rate of 3.08 to the dollar.

Late on Monday, the peso had traded at a rate of 3.75 to the dollar, having dropped 75% since it was floated free on currency markets in January.

Temporary relief?

But analysts said the respite could be short-lived.

"There's no real forecastable level of the peso," said one foreign analyst.

"There will come a level at which capital will come back into the country. I just don't know if that's at four (pesos to the dollar) or six."

The central bank has spent nearly 10% of its foreign exchange reserves - totalling $1.2bn - to protect the peso since January.

The decision to let it float saw a starting rate of 1.40 pesos to the US dollar.

"In the absence of having some credible fiscal policy and economic management, spending reserves was just throwing money away," said Doug Smith, head of Latin American research at IDEAglobal.

Old fears

The sharp fall is raising fears that inflation could shoot up, since the weaker currency means the price of any goods sourced from outside Argentina is rising.

These fears were strengthened on Tuesday as European oil firm Royal Dutch Shell raised fuel prices by up to 6.7%.

"People feel safer when they have dollars," said biochemistry student Ana Maria Bentacort.