The Argentine peso has fallen consistently against the US dollar this month, losing almost 12% since January 1. The behavior of the informal “blue” dollar exchange rate continues to raise concerns about a possible escalation in inflation rates, which are forecast to reach almost 100% this year, rates similar to those registered in 2022.
Argentine peso continues to fall
Argentina is currently immersed in a devaluation scenario that has the possibility of causing a price escalation this year. The value of the Argentine peso against the US dollar has fallen by almost 12%, reaching a record rate of 386 pesos per dollar on January 27 in its ‘blue‘ variation.
The exchange rate has been rising steadily since December, when it hit 356 pesos to the dollar, breaking a record low for the peso at the time. The government has made moves to maintain its stability, injecting dollars to satisfy the demand of registered importers in the market and announcing an operation to purchase more than $1 billion of its own foreign debt.
However, this seems to have done just the opposite, and now local analysts are concerned about the country’s reserve balance after this disbursement, which would affect the central bank’s capabilities. María Castiglioni Cotter, director of an economic advisory firm, criticized the move, stating that it is meaningless while the country is facing a budget deficit.
Inflation and Coming Crises
This continuous fall in the value of the Argentine peso is already affecting the prices that citizens have to pay for goods and services, even though the government has applied a series of measures to limit the rise in prices of various products. Calculations made by private companies predict an inflation rate above 5% in January, a high figure when compared to countries like Brazil, which is projected to register a rise of less than half a point.
Salvador Di Stefano, another local analyst, believe that the debt purchase operation could accentuate the problems currently facing the State. Di Stefano said this could affect the amount of foreign currency available for imports, causing the economy to slow down even further.
According to him, the dollar will continue to fall while the government tries to inject dollars to stop the depreciation of the peso, a similar strategy used by President Macri in 2018. In addition, public spending would accentuate this devaluation, since the government is expected to increase it due to the proximity of the elections. private analysts suppose Argentine inflation will exceed 95% this year.
What do you think of the devaluation of the Argentine peso and its effect on inflation rates? Tell us in the comments section below.
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