As Argentines dump pesos for dollars, president seeks to mop up excess

Buenos Aires

PRESIDENT Cristina Fernandez de Kirchner can't keep Argentines from dumping their pesos for dollars. So she's trying a different tack: draining a record amount of local currency out of the economy instead.

This year, the central bank has removed 97.2 billion pesos (S$15 billion) from Argentina's financial system, the most on a net basis since at least 2003. Relative to inflation, the number of pesos is now increasing at the slowest rate on record.

While Ms Fernandez began her presidency in 2007 by flooding the nation with pesos to spur growth through consumption, the plan is now backfiring with consumer prices rising 40 per cent a year and the economy mired in a recession. After prohibiting purchases and ordering raids on exchange houses to contain the surge in dollar demand, she's now counting on the central bank to soak up th…