Argentina Is Going Broke to Stall a Full-On Currency Collapse

— Argentina’s fight to prevent its problematic currency from a total meltdown is leaving the central bank, by some estimates, broke.

The South America nation has already spent all of its liquid international reserves, plus another estimated $1 billion, according to Buenos Aires-based consulting firm 1816 Economia & Estrategia — raising the stakes as the nation contends with a historic drought and impending recession.

Without easy-to-spend cash on hand, questions are swirling about how much longer the government can continue to defend the peso from an all-out collapse. At risk is a currency devaluation that stands to fan 104% inflation and exacerbate high levels of social unrest ahead of October’s presidential elections.

“Fewer reserves leads to more pressure on the exchange rate, which in turn leads to more pressure on inflation,” said Fernando Losada, a managing director at Oppenheimer & Co. “I see no possible scenario under which inflation goes below three digits this year.”

Argentina has struggled to build and keep international reserves at healthy levels for decades, running through cash piles to combat rising prices and juggle obligations on overseas bonds.