Argentine Economy Faces Uncertainty as Official Dollar Falls Below Pre-Devaluation Level

The dollar’s competitiveness has decreased significantly since the post PASO era.

In recent months, the multilateral real exchange rate (TCRM) in Argentina has fallen below its pre-devaluation level, making it less competitive with other currencies such as Brazil, China, the United States, and the European Union. This decline has put pressure on the government to address the situation through options such as devaluation with inflation or implementing a differential exchange rate.

The official dollar was raised from $290 to $350 by Sergio Massa, but inflation has eroded this gain. Despite this increase, the Argentine peso has lost 66% of its competitiveness since December 2015 when it stood at $366 in the official dollar. As April approaches and the field harvest begins, the government faces tough decisions and must weigh its options carefully.

According to Central Bank statistics, the multilateral real exchange rate index is currently at 106.88 for March 15th, compared to a base 100 in December 17th, 2015. The official exchange rate is now further behind than previous administrations and options for addressing this issue include managed devaluation or seeking capital inflow or IMF financing.

Economists emphasize that maintaining competitiveness is crucial for Argentina’s economic stability and suggest that new exchange rate schemes or a soybean dollar may be necessary to achieve this goal. However, implementing these solutions may face challenges and require careful consideration of their potential impact on the country’s economy. Ultimately, finding a balance between exchange rate policies and economic strategies will be critical for Argentina’s continued growth and prosperity.

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