Argentina
What is the
Argentine peso (ARS)?
The Argentine peso, often denoted by ARS, is one of the official currencies in Argentina. At the dawn of the twentieth century, the Argentine peso was one of the most popularly traded currencies in the world. Unfortunately, the next hundred years were fraught with economic struggle: a focal issue surrounding the peso was a series of periods of hyperinflation that eventually led to great depreciation of the currency.
In its history, Argentina has implemented five different currencies: the Peso Moneda Nacional (1881-1969), the Peso Lay (1970-1983), the Peso Argentino (1983-1985), the Austral (1985-1991), and the Nuevo Peso (1991-present). This Nuevo peso had an international fixed exchange rate of 1 US dollar to 1 peso. However, this pegged system was soon changed to a floating exchange rate because of the severe economic crisis in 2001.
Sovereign Ratings for Argentina
Moody's Rating |
Caa1 |
S&P Rating |
SD |
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Sovereign credit ratings play an important part in determining a country's access to international capital markets, and the terms of that access. Sovereign ratings help to foster dramatic growth, stability, and efficiency of international and domestic markets. |
What does it look like?
Political Structure
The Republic of Argentina is divided into 23 provinces and one federal district. Its government consists of three branches: executive, legislative and judicial. The President and Vice President of Argentina lead the executive branch, while the legislative branch is bicameral consisting of a 72-member National Congress and a 257-member Chamber of Deputies. The judicial branch consists of a nine-member Supreme Court, appointed by the President and approved by the Senate.
Prominent Figures
The President of Argentina, Carlos Saul Menem, has been in office since July 8, 1989 and his Vice President, Carlos Ruckauf, since July 8, 1995. The Central Bank in Argentina is entitled Banco Central de la República Argentina and is led by its president Martin Redrado.
Unique Characteristics
One of the defining moments of Argentine society was the long coming economic crisis, which during the late 1990s and early 2000s, hit the nation hard. After military rule had been replaced by a democracy in 1983, new government plans to stabilize the economy required many new loans. However, these, along with military rule debts caused the economy to collapse and trigger periods of high inflation, reaching almost 200% per month in 1989. As the debt continued to grow during the 1990s, the International Monetary Fund (IMF) continued to lend money to Argentina —but this would later hurt the economy tremendously as payments were postponed. In addition, a widespread Latin American economic crisis sprung about when Argentina 's trade partners such as Mexico and Brazil also faced economical crises, causing a general doubt in the whole region. In 1998, Argentina officially entered a recession, which lasted for three years and ended in a collapse as fears of the devaluation of the peso led to bank runs. This brought about grave amounts of protest and violence affecting many people and companies, causing several deaths. In 2001, the fixed exchange rate was removed and the peso was quickly devalued. The exchange rate was then left to float, causing further devaluation (about 4 pesos per dollar) and continued inflation (about 80%.) In May 2003, new administration's measures such as selling reserve dollars in the public market helped the peso to gradually revalue and eventually stabilize. As of 2005, the Central Bank sells pesos and buys dollars of large amounts in the free market to maintain the dollar price from falling.
In 2005, the government of Argentina set forth a requirement for banks to hold up to 30 percent of foreign capital inflows for investments (which will be locked away for one year). The increase in reserve requirements was the product of a massive government debt swap that lifted investors' confidence in Argentina 's economy and renewed interest in financial investments. The reserve requirement is aimed at discouraging “speculative” funds to prevent the peso from strengthening further against the dollar.
The Argentine peso has continued to strengthen in the first half of 2005, reflecting an increase in USD earning by exporters who continue to enjoy the benefits from the pick up in global demand and rising international commodity prices. The government is particularly concerned with this price appreciation as it threatens the export expansion of Argentina . The government has been trying to purchase average of 20 million USD per day to bolster the peso. Despite the intervention by the Central Bank of Argentina , the peso continues to appreciate beyond the desired threshold.
Key Economic Factors
Consumer Price Index: The CPI is an instrument used for measuring inflation and gauging movements in prices of products on a constant-quality basis. As seen, from 2004-2005, Argentina 's CPI has been on the rise. As for the second half of 2005, the government has agreed to raise minimum wages—a move that may augment price pressures and in turn, inflation rates as well.
Gross Domestic Product: The Gross Domestic Product measures the total production and consumption of goods and services in Argentina . The growth of this indicator has been relatively erratic, as in 1995 it was –2.8% yet totaled 9% for 2004. The GDP is comprised mainly of consumer spending (roughly 2/3 of the figure) and thus is highly sensitive to domestic demand.
Key Economic Realms
Argentina makes its profits from a variety of factors, namely: rich natural resources, a literate and educated population, export-oriented agricultural industry, and an industrial base (rising, as of mid 2005). However, the last decade has brought about external and internal debt, inflation, budget deficit, lack of foreign investing, loss of confidence by investors, and slowdowns in growth.
In 2001, spreads on Argentinean bonds widened, huge withdraws were taken from national banks, and consumer and investor confidence continued to decline. Due to the Argentinean economic crisis, the peg was abandoned in 2002 causing inflation rates to increase for the first half of the year.
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Fast Facts |
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- Other Currencies Accepted:
United States Dollar and central government and province issued banknotes valued at par with the peso
- Currency Peg:
No
- Black Market for Currency:
No
- Currency Volatility:
Medium
- Estimated GDP Per Capita:
3,912 USD (2004)
- Languages Spoken:
Spanish (official), English, Italian, German, French
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