Argentina: peso problem - FT.com It's not the fall, it's the sudden stop. Argentines must know the power of that adage when it comes to their currency. This week, their government allowed the peso's official rate to fall 15 per cent against the dollar in one day. The day after that, it eased controls on buying dollars, a volte-face from enforcing them through two years of double-digit inflation. But oh dear: both the official peso and an unofficial - weaker - "Dolar Blue" rate continued to tumble, despite the belated recognition of reality. This is a sign that the real sudden stop could be yet to come: a spurt in inflation and another, larger, devaluation. Mexico 1994, redux. Still, cheer up. This may be the moment to buy Argentine bonds. This has, admittedly, been pretty risky advice at any given point in the past hundred years or so: the country is a serial defaulter. The US dollar bonds issued after the last decade's restructurings have also only been for investors with the most iron of constitutions in the past year or so. Holdouts kept on winning US legal victories that would restrain Argentina's ability to avoid paying them. Argentina's lawyers found ways to buy time - and the bonds returned a fifth last year - but holdouts have been able to prevent Argentina issuing fresh international debt without its dollars being seized. But lack of access to US dollar borrowing is exactly what cannot go on much longer. The biggest problem for the government in the past two years has been the decline in its international reserves, rather than the peso's slide. The reserves are now $29bn - from $50bn at the start of 2011 - after the failure to stem capital outflows. That is a problem when the reserves are used to pay the dollar debt, with $8bn due in 2015. This week's moves suggest the government prioritises stabilising them over defending the peso. That implies, in turn, that it cannot go on paying debt out of reserves, but must issue debt again. Argentina was trying to do this slyly, recently - restarting talks to settle unpaid official debts, issuing dollar bonds to Repsol there over the YPF debacle. Time to move faster. Holdouts will have to be negotiated with. A final legal verdict will only give the holdouts more leverage. The 2033 bonds already trade two-thirds below par, versus the upside on offer from a deal. And it beats the risk in Argentine equities. After its devaluation in 1994, Mexico's stock market dropped two-thirds before turning. Ah, the sudden stop.