The Argentine peso is already the world’s strongest currency against the dollar
During the electoral campaign, Javier Miley assured that the peso was “an excrement” used by Argentine politicians to “plunder” the citizens. His promise was to get rid of the currency and let people save in dollars, the currency valued in Argentina. But the reality of his mandate is quite the opposite: not only is there no plan to convert the economy to the dollar, but the peso has risen 25% against the dollar in the market over the past three months, becoming the strongest against the dollar in the world. American currency.
The movement is an unprecedented historical turn in a country that has for nearly a century been accustomed to seeing the value of its currency move in only one direction against the dollar: downwards. Sometimes slowly, sometimes at a speed of a thousand kilometers per hour, but always downwards. But Miley’s measures to attempt to curb inflation have had an immediate impact on the value of the currency.Which is already being seen in the markets.
Exchange rates are very high in Argentina. The ‘official’, at 894 pesos per dollar, is little less than a four-leaf clover: the Central Bank offers it in drips and drabs and only to the very lucky ones. Since the arrival of the current government, the dropper has been further adjusted, and the requirements for purchasing it are much stricter. The result is that most people resort to two other mechanisms. The ‘blue dollar’ is offered in so-called ‘caves’, illegal exchange houses, but is tolerated by the government and everyone knows it well. That dollar reached 1,255 pesos per unit in January, before quickly returning to 1,000 in March., Today it is trading at 1,055, practically the same level as before the election last November, when Miley advised selling “excrement”.
Something similar has happened in the so-called “settlement with cash”, the financial dollar with which investors and companies work by buying bonds and stocks listed in Argentina in pesos and selling them for dollars abroad. This exchange rate reached 1,310 pesos on January 22 and returned to 1,086 pesos this Friday.
The most spectacular thing is that this revaluation is happening at a time when inflation continues to rise. Although the trend is positive, as price growth has declined from 20.6% in January to 11% in March. Accumulation in first quarter still at 51%Horrible data for any other country. And yet, not only is the peso not depreciating at the same rate as it used to, it is also appreciating.
Why has the peso been revalued?
Despite Miley’s original plans, Argentina’s Economy Minister, Luis ‘Toto’ Caputo, made it clear that His initial plan was to stabilize the peso before considering any form of dollarization., To do this, they sharply cut exports, forcing companies to sell their products for pesos, increasing demand for the local currency. Dollar earnings from crops have grown much better this year than last year, which was hit by historic drought, which has also led to a revaluation of the currency. And the moratorium on printing of bank notes to maintain the fiscal deficit has also prevented continued devaluation of the peso.
The results have been the exact opposite of what Miley preached in the campaign: Punish those who sold pesos to buy dollars, Traditionally, the dollar was the safest form of savings, as the exchange rate constantly rose at the rate of inflation.
However, in these months, people who have decided to sell some of their dollars to compensate for the decline in income due to the ongoing severe recession in the country or strong pension cuts for retirees have found that those dollars are worth more than the same amount. has been replaced instead. Pesos like five months ago, when prices were much lower than they are now. The result is a hidden ‘intervention’ of these people’s savings, which once again strengthens the value of the peso. And, incidentally, foreigners are also ‘punished’: for every dollar exchanged, visitors get the same number of pesos as in November, despite the fact that prices have increased by 51% since then.
If this reinforcement continues for a long time, it is possible that Miley will manage to break one of Argentina’s most deeply rooted traditions: get rid of your pesos as quickly as possible and save in dollars. It is possible that liberal economists will not be able to dollarize Argentina, but the country’s ‘pacification’ is proceeding at an astonishing pace.
(tagstotranslate)economy