The Argentine peso fell by some 8% on Jan. 23, declining from 7.14 pesos to the US dollar to 7.75 at the end of the day. The currency plunged by 20% in the early hours, to 8.50 pesos to the dollar, but regained much of the loss after the central bank intervened later in the day; the bank reportedly spent $100 million in the process. This was the worst showing for the peso since the country's financial crisis in late 2001 and early 2002.

The problems in Argentina affected other Latin American markets. The Brazilian real fell by 1.2% to 2.40 reais to the dollar, and the São Paulo stock exchange, the BM&F Bovespa, declined by almost 2%. The Mexican peso, which has been falling since the beginning of the month, continued to decline, ending Jan. 23 at 13.42 pesos to the dollar, a 2.44% decline since Jan. 1. The fall of the Argentine peso was probably a factor contributing to the decline in the New York Stock Exchange on Jan. 24. The Dow Jones index fell by 318 points, 2.1%, while Standard and Poor's fell by 38.17 units, 2.09%, and the Nasdaq fell by 90 points, 2.2%.

Analysts offered different explanations for the Argentine peso's decline. One cause appeared to be a slowing of China's economy, which led investors to pull out of emerging markets around the world. The immediate cause may have been a decision by Argentina' s new economy minister, Axel Kicillof, to protect the country's foreign reserves by withdrawing support for the peso. Until late January the government had been propping the peso up by selling off reserves. Kicillof himself offered a different explanation. He charged that Juan José Aranguren, the president of Shell Argentina, Royal Dutch Shell's local subsidiary, had intentionally precipitated the crisis on Jan. 23 by offering to buy $3 million at a rate of 8.40 pesos to the dollar. "The maneuver was so obvious that there's no need to explain it too much," Kicillof said on Jan. 24. Aranguren was trying to destabilize the government by pushing the peso down, according to Kicillof. (Wall Street Journal, Jan. 23; New York Times, Jan. 24; La Jornada, Mexico, Jan. 24, Jan. 25, Jan. 25, Jan. 26)

From Weekly News Update on the Americas, January 26.