The peso is among the most devalued currencies in the world, along with Venezuela, Zimbabwe and other countries in crisis or at war

The Argentine peso is the sixth most devalued currency in the world in the first 8 months of the year, behind the currencies of countries in extreme situations. But according to a report from a local consultancy firm, the real exchange rate (i.e. taking into account inflation) of the Argentine currency against the official dollar has appreciated by 1.5 % in August and will reach the primary, open, simultaneous and compulsory (STEP) elections on September 12, with a real appreciation of 9.5% and the general ones, in November, of 11%.

The paradox is due to inflation and the government’s decision to use the official exchange rate as an “anchor” for prices, strengthen controls on the foreign exchange market and postpone any substantial foreign exchange decision at least after the legislative elections in November.

According to “Currency Watch List“(Foreign exchange observatory) prepared by the economist Steve Hanke, Professor at Johns Hopkins University in Baltimore, United States, As of August 27, the currency that had depreciated the most in nominal terms since January 1 was the Venezuelan bolivar: 98.76%. Next come the Lebanese pound (-86.76%), the Zimbabwean dollar (-84.47), the Sudanese pound (-80.45), the Syrian pound (-73.10) and in sixth place the Argentine peso (-57.69). The Top 10 of currency depreciation is completed by the Iranian rial, the Turkmen manat, the Ethiopian birr and the Nigerian naira.

The ranking closely resembles the “Misery Index” that Hanke established earlier this year and published by the conservative magazine The National Review ”and is strongly correlated with the respective inflation rates.

In turn, the Argentinian peso has continued to appreciate against the “official dollar” they manipulate, with the help of foreign exchange stocks, the Economy and the Central Bank, and has continued to “slide. ”Below the inflation rate.

In August, according to a report by Equilibra, there were more interventions by the BCRA and the “crawling ankle(Official price slippage) accelerated, in large part because the cap reached by net reserves in mid-July was exceeded. Since then, the consulting firm that manages Martin rapetti as well as economists Lorenzo Sigaut and Lorena Giorgio, net reserves decreased by $ 1.3 billion due to the larger intervention that the plant had to assume, which in 5 working days (as of September 2) had accumulated net sales of $ 360 million . The report adds that if we also consider the entity’s daily intervention in the bond market “to control the gap” between the official exchange rate and the “alternative” dollars, the loss was $ 500 million. dollars in a week.

According to the cabinet, “faced with a limited stock of net reserves (around $ 6,500 million), the rate of drainage last week is not sustainable. For this reason, the Centrale gently stepped on the accelerator and the crawling-peg of the official exchange rate went from 12% to 17% (annualized daily variation) and we do not exclude that the importers’ tap is a little firm “. .

According to the report’s calculations, in August, the average exchange rate rose 1% compared to July, against inflation estimated at 2.9% for the period. In this way, prices have beaten the nominal run of the official dollar for the seventh consecutive month. If we also take into account US inflation, it turns out that “the bilateral real exchange rate against the US dollar appreciated by 1.5% over the month, and will reach the primary elections with an appreciation. actual of about 9.5% in cumulative years, ”the report says.

As Equilibra also expects the government to continue raising the official dollar at a rate of between 1% and 1.2% per month until November, the peso will arrive at the elections with a real cumulative appreciation of 11%.

Stretching the assumptions, the report’s authors envision that the government will accelerate the exchange rate “slippage” after the elections in the second half of November (legislative elections are held on the 14th of this month) and in December, a trajectory that would involve an appreciation of 10.2% over the year and would put the real exchange rate close to the average of the last 50 years.

The “backward” swap has been a practice of several governments and economic efforts to fight inflation, with little luck. Tried so hard Martinez de Hoz, between 1979 and 1982, without getting inflation to fall below 100% per year; It was reiterated – albeit in an institutionally stronger system, such as the convertibility regime – the government of Carlos menem since 1991 and arrived at the end of 2001, with the Alliance at Casa Rosada. It was also part of the economic policy of Kirchnerism from the middle of the first presidency of Cristina Kirchner, and the management of Mauricio Macri between 2017 and the April 2018 crisis. Either way, the inflation performance was poor, but it was justified by the fact that faster devaluation would lead to even higher inflation.

Hanke’s calculations are based on nominal prices and inflation rates estimated on the basis of “Purchasing Power Parity”, which in Argentina’s case was three times higher than official inflation l ‘last year.

Both the ranking of the currencies which depreciate the most and that of the “world misery” of the American academic, a veritable monetary “hawk”, put Venezuela and other countries grappling with serious internal problems in the lead. Lebanon suffered an episode of hyperinflation and an explosion in 2020 that devastated its capital, Beirut. Zimbabwe is under the dictatorship of Emmerson Mnangagwa, an emulo of Robert mugabe, who ruled between 1980 and 2017, when he was overthrown by the military. Sudan is one of the poorest countries in the world and suffers from chronic water shortages and Syria has gone through a civil war in which insurgents have failed to prevail over dictator Bashir.

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