• The Argentine peso has consistently lost value against the U.S. dollar throughout January, dropping by almost 12%.
• Analysts are concerned about inflation rates increasing sharply, with estimates reaching as high as 100% in 2021.
• Moves to stabilize the exchange rate, such as government debt purchases and injections of dollars into the market, have had limited success in containing the devaluation of the peso.
Decline of Argentine Peso
The Argentine peso has fallen steadily against the U.S. dollar this month, losing almost 12% since Jan. 1. The behavior of the exchange rate for the informal „blue“ dollar is raising fears about a possible surge in inflation rates this year that could reach 100%, similar to what happened in 2022.
In an effort to maintain stability, the government has injected dollars into the market to satisfy registered importers and announced a purchase operation of more than $1 billion of its own external debt. Despite these efforts, analysts remain worried about the balance of Argentina’s reserves after this disbursement, which would affect its ability to respond to economic issues going forward.
The continued depreciation ofthe Argentine peso is already having an impact on consumer prices. Private firms predict an inflation rate higher than 5% for January alone – significantly more than other countries like Brazil – raising concerns that it could continue escalating if further measures are not taken soon..
Criticism Against Government Action
María Castiglioni Cotter criticized recent government moves by stating they make no sense while facing a budget deficit and might actually worsen existing economic problems rather than solve them by reducing foreign currency available for imports and slowing down economic activity even further.
The devaluation of the Argentine peso continues to bring uncertainty regarding future inflation levels and overall economic performance for 2021 and beyond. While governments measures have been implemented so far, some analysts remain critical about their effectiveness or potential outcomes for Argentina’s economy going forward