The Argentine peso in election years

1st August 2019

By The Essential Staff

The Argentine peso in election years

The debate over the value of the peso is becoming central in Argentina’s campaign.

The graph below shows the trajectory of the peso in real terms during the last three presidential election years. In all cases, the peso appreciated in the build up to the vote, but 2019 was in some respects different to 2015 and 2011.

</p> <img class="wp-image-1697 aligncenter" src="" alt="2011, 2015 and 2019: three years of peso appreciation" width="671" height="511" srcset=" 300w, 600w, 768w, 1024w" sizes="(max-width: 671px) 100vw, 671px" /> <p>As the graph shows, volatility was still significant during the first half of 2019, due to a combination of the aftershock of the 2018 run against the peso and the fact that the Central Bank intervened less than in previous cycles. In 2015, the Central Bank was extremely reluctant to authorize currency purchases at the official exchange rate (leading to the appearance of black markets), while in 2011 it steadily sold assets to sustain the purchasing power of the peso.</p> <p>An additional difference, however, can be seen in the small box to the left of the chart. If the same starting point is used to compare 2011, 2015 and 2019, the peso was more overvalued in the previous two cycles than in the current one.</p> <p>With black-market exchange rates 30 to 40 percent above official rates in 2015, experts agreed a devaluation after the new president&#8217;s inauguration was inevitable. Although this is still possible around December 2019, some analysts believe that the announcement of structural reforms and budget cuts during the next administration could be enough to instill renewed confidence in the Argentine currency after the winner is announced.</p> <p>If reforms aren&#8217;t enough to re-finance debts and improve the Central Bank&#8217;s balance sheet, however, the peso could still to be under pressure.</p> <p>&nbsp;</p> <p><em>Chart source: Eco Go consultancy agency.</em></p> <p>

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The Essential Staff

The Essential is a premium subscription-based news platform that brings you high quality journalism and in-depth coverage in English about the changing face of Argentina’s politics and economy.