The Argentine peso has consistently fallen against the US dollar this month, losing almost 12% since January 1. The unofficial “blue” exchange rate movement against the dollar continues to bring concerns about the possibility of escalating inflation, which is projected to reach nearly 100% this year, as well as the rate registered in 2022.
Argentine Peso Continues to Fall
Argentina is currently in a currency devaluation scenario that could cause prices to rise this year.18} The Argentine peso has fallen nearly 12% against the US dollar, and on January 27, it hit a 386 pesos, a record “20} blue” floating rate. This is a variation of the
exchange rate has been on the rise since December, when it hit 356 pesos to the dollar, the lowest peso value at the time. The government has moved to maintain that stability by injecting dollars into the market to meet demand from registered importers and announcing operations to purchase more than $1 billion in foreign debt.
However, this seems to have accomplished the exact opposite, and now local analysts are worried about the balance of the country’s reserves after this disbursement, which will affect the ability of the central bank. Maria Castiglioni Cotter, head of an economic counseling firm,criticized the measure asmeaningless in the face of budget deficits.
inflation and the coming crisis
The continued fall in the value of the Argentine peso is already affecting the prices citizens have to pay for goods and services, even if the government is applying a series of measures that limit price increases for some products. According to private sector calculations, inflation is expected to be more than 5% in January, a high figure compared to countries like Brazil, where the rate of increase is expected to be less than half.
Salvador Di Stefano, another local analyst, sees the bond-buying operation as likely to exacerbate the problems the country is currently facing. Di Stefano said that it could affect the amount of foreign currency available for imports, which could further slow down the economy.
According to him, the dollar will continue to fall because the government will try to inject dollars to stop the peso from falling, the same strategy that President Macri used in 2018. In addition, public spending will accentuate this devaluation as the government is expected to step it up due to the upcoming elections. Private analysts expectandArgentina’s inflation rate will reach over 95% this year.
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