The tightening of capital controls (“el cepo”) in Argentina will give the central bank some breathing room as it attempts to manage the peso over the coming months. But Argentina’s experience using pervasive controls between 2011 to 2015 suggests that this strategy risks brewing another currency crisis in the medium term. Elsewhere, Brazil’s ongoing fiscal drama took a twist this week as President Bolsonaro shelved his Renda Brasil social welfare policy. While the move should help to keep the spending cap in place (for now), the fiscal saga looks set to drag on for some time.
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