Argentines, who abandoned “one-to-one” convertibility between their currency and the US dollar 20 years ago, live waiting for the price of this currency, respond inventively to multiple exchange restrictions and literally sleep on a mattress. valuable greenbacks as a refuge against recurring crises and high inflation.
It’s what experts call a “bi-monetary” economy: citizens make their daily expenses in Argentinian pesos, but what they manage to save is used to buy dollars and in this currency they even carry out large transactions. , such as buying real estate, and setting prices for many goods and services in the economy.
“Argentina is a bi-currency country. Economic actors spend in pesos and save in dollars. And this is independent of the value of the dollar. The problem is the distrust of the peso and the fact that as a currency it does not have the attribute of being a store of value,” said Leonardo Piazza, director of the cabinet of LP Consulting.
According to the expert, the beginning of this phenomenon dates back to the late 1980s and early 1990s, when Argentines began to buy dollars to protect their savings against high inflation.
Then came the artificial “one-to-one” parity between the peso and the dollar, which was in force for almost a decade until the beginning of 2002, when, in the midst of the serious economic, political and launched at the end of 2001, Parliament repealed convertibility.
On February 11, 2002, the price of the dollar in Argentina was again determined by supply and demand in the foreign exchange market. Since then, the demand for dollars has continued to increase, sometimes generating episodes of severe financial stress.
The peso, equivalent to one dollar, is currently worth a little less than half a cent on the informal market.
According to the Currency Observatory published weekly by American economist Steve Hanke of Johns Hopkins University, the Argentine peso, with a depreciation of 64% since the start of 2020, is the sixth most devalued currency in the world by against the US dollar. , a ranking led by the currencies of Venezuela, Zimbabwe, Lebanon, Sudan and Syria.
Crazy for the greenback
Every ordinary Argentine citizen is aware of the prices of US currency. The media report values each day in a prominent place.
Piazza noted that outside of the United States, Argentina is one of the countries with the most physical dollar bills, largely outside the system.
“Dollar savings are in overseas accounts, stored in safes or kept in homes under the mattress. Wherever the dollars go, they are outside the formal circuit of the internal economy,” he said.
According to the latest official data, Argentines have funds outside the local system – whether in safes at home or in accounts abroad – amounting to $252,186 million, equivalent to to nearly seven times current reserves. country’s currency.
In an unbalanced economy and with a Central Bank with increasingly poor reserves, the growing demand for foreign currency has led the authorities to impose restrictions on access to dollars in banks and exchange offices in recent years.
This made the informal market flourish and led investors to devise more sophisticated mechanisms for obtaining dollars through, for example, transactions with bonds and stocks, resulting in multiple quotations – almost a dozen – of US currency that practically double the official value. .
Argentina’s monetary problem has its roots in the budget deficit that it has been dragging on for 60 years.
This budget deficit was financed by the monetary issue and by the public debt, internal and external.
The consequence of this scenario is “chronic and structural” high inflation.
Argentina must command the state in an integral way, it must have budgetary discipline. This is the only way to recover the value of the Argentine peso.
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