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Argentina: 2011 to adjust the exchange rate policy response to economic challenges

Since the phenomenon of inflation and capital flight initially be controlled, the Argentine government plans to accelerate depreciation of the currency rate adjustment through exchange rate policy on the domestic market and business protection. This table Minge will be relaxed on the exchange rate the central bank intervention on exchange rate policy in a more flexible attitude.

Argentina's central bank officials in the "Business Chronicle who reported," told reporters in recent months, other Latin American countries, currency depreciation rate much higher than the Argentine peso, the Argentine enterprises in production and exports faced with severe challenges. A government and central bank after careful evaluation, that under the present time may be appropriately increased rate of depreciation of the peso, to help domestic enterprises to expand sales and exports.

Since last year, inflation in Argentina is facing a serious problem, even last year's actual inflation rate reached 25 percent, the government feared that the peso devaluation will increase inflation. In addition, the financial turmoil intensified in recent months, Argentina's financial system, capital loss. To this end, the Argentine central bank decided to persuade management to adopt on the exchange rate float, "the policy of the central bank based on macroeconomic, financial markets and price levels of assessment, development of the upper limit exchange rate fluctuations, if exchange rates remain within the limits of the central bank will be allowed to free-floating; if more than the limit, the central bank will intervene in the Argentine central bank wants to change people through this intervention the expected devaluation of the peso, to ensure financial market stability.

However, since September of this year, the Latin American major currencies against the U.S. dollar has shown a substantial depreciation of the Argentine peso and strong central bank intervention in the depreciation rate is not large. According to the Argentine Regional Economic Research Institute recently released report, the last three months, Brazil, Mexico, Chile and Uruguay currency against the U.S. dollar depreciated by 43%, respectively, 30%, 26% and 22%, while the devaluation of the Argentine peso by only 10%.

Argentina's central bank to support the currency policy has been to stabilize the financial markets has played a positive role, but the negative impact on the national economy is also very serious. Economic Research in Argentina reports that Latin American countries, mostly because exporters of primary products, the export structure is similar, so the Latin American countries, Argentina is an important trading partner and a competitor in international trade. Other Latin American countries, currency depreciation rate much higher than the Argentine peso, the Argentine companies and products in trade with these countries compete in a very disadvantageous position.

In addition, the frequent intervention in the foreign exchange market has greatly increased the burden on the central bank. Financial market volatility in Argentina during the most intense, A central bank in the foreign exchange market each day put $ 1 billion in cash to intervene, financial pressure. A central bank's foreign currency reserves currently at $ 47 billion, while international market prices of agricultural products fell sharply in Argentina's trade surplus is decreasing.

Since October, with the Argentine economy apparent signs of slowing, inflation rate has slowed down considerably. The Argentine financial system capital outflows are eased in November. In this case, Argentina's exchange rate policy changes appear dramatic, nearly two weeks faster than the peso devaluation.

Devaluation of the peso for the near future, a reasonable goal, Argentina businesses and research institutions in general tend to be at least on the basis of the current depreciation of 10%. Argentina and Economic Research that the U.S. dollar against the Argentine peso exchange rate of at least about 1 to 3.70, in order to make Argentine companies have regional competitiveness. The Argentine central bank called for the industrial sector as soon as the U.S. dollar against the peso exchange rate raised to the level of around 1 to 4.

But economists warned that Argentina, no one is perfect exchange rate policy, exchange rate policy on the national economy have any positive and negative effects. For central banks, exchange rate policy requires a comprehensive assessment of the size of comprehensive income and changes in the economic situation, to be adjusted in due course. If too rigidly adhere to a fixed exchange rate policy, and sometimes it will backfire.