In relation to the Argentine peso, the US dollar has been rising fast lately. By the end of the day yesterday, the US dollar was worth just under AR $20. And while the optics are worrying to some, the government insists that volatility is normal, and may even result in more growth for Argentina.
Production Minister Francisco Cabrera indicated today that the government isn’t too concerned with the rapid escalation of the dollar’s value, because they knew it was going to happen.
“I’m not worried about it,” Cabrera said to Radio Mitre from France (he was at the World Economic Forum in Davos with Macri). “I believe that the important decision was the one made by Federico Sturzenegger (Argentina’s Central Bank chairman) and Nicolás Dujovne (Treasury Minister). At their press conference they announced an adjustment in inflation targets and that modified the Central Bank interest rates. We knew that this would produce changes like this.”
The US accounts for 12.5 percent of Argentina’s imports, so as the dollar goes up in value in comparison to the peso, those imports will become more expensive for Argentines. With a volatile currency, it’s possible that imported goods will become more expensive because of these changes.
Macri’s move to float the peso has been aimed at gaining the trust of international investors, which has successfully resulted in the near-equivalence of the official exchange rate and the “blue” exchange rate. Now, because the peso is floating, volatility is to be expected.
Cabrera acknowledged that the increase of the US dollar can generate nervousness. “Sometimes volatility is good, so that there aren’t extraordinarily large financial gains.”