The Argentine peso (ARS) is Argentina’s official currency, and it has been in circulation in various forms for decades. Known for its colorful banknotes depicting important figures and landmarks, the physical money reflects Argentina’s rich culture and history. However, the currency has also become synonymous with Argentina’s economic challenges, as it has experienced significant inflation, devaluation, and volatility over the years.
The Argentine peso reflects both the resilience and complexity of Argentina’s economy. For foreign visitors, understanding the currency and exchange options can lead to a more affordable and enjoyable trip, while locals continue to navigate the daily impacts of inflation and devaluation on their purchasing power. For forex traders, speculation on the ARS is a challenging, but potentially highly rewarding, endevour. The intricate complexities of this currency means that it is not considered a suitable choice for novice forex traders.
Here’s a closer look at the Argentine peso, its history, current challenges, and what it means, visitors, locals and forex traders.
Overview of the Argentine Peso
- Symbol: $
- Currency code: ARS
- Numeric currency code: 032
- Subunits: 1 peso = 100 centavos
- Banknotes: Examples of denominations are 10, 20, 50, 100, 200, 500, 1,000, 2,000, and 10,000 pesos. Banknotes below 1,000 are rarely used, as the value is so low.
- Coins: 1 and 2 pesos, as well as several smaller centavo coins. They are rarely used since they are of such low value.
Issuing
The Argentine peso is issued and regulated by the Central Bank of Argentina (Banco Central de la República Argentina – BCRA), which manages the country’s monetary policy.
Current Economic Challenges For the Argentine Peso
High Inflation
In the late 20th and early 21st centuries, Argentina has one of the highest inflation rates in the world, with annual inflation often reaching or exceeding 100% in recent years. This rapid inflation erodes the value of the peso, affecting purchasing power and making everyday items significantly more expensive for Argentine citizens.
Since current President Milei took office in 2023, the inflation rate in Argentina has dropped dramatically, despite increased inflation rates aroun the globe. It remains to be seen if President Milei´s economic program will be enough to keep inflation down long-term, or if the decreased inflation experienced under his early presidency in 2023 and 2024 will be no more than a temporary relief.
Multiple Exchange Rates
Due to capital controls, Argentina has several exchange rates, including:
- The Official Exchange Rate, which is set by the Central Bank.
- The Blue Dollar Rate. An informal or “black market” rate used by locals and tourists to exchange dollars for pesos, offering a significantly better rate than the official rate.
- MEP Dollar and CCL. These are legal financial methods used to access more favorable rates, typically by buying and selling financial assets.
The existence of multiple exchange rates creates a confusing environment and complicates business transactions.
Devaluation Pressure
Due to inflation and economic uncertainty, the peso frequently undergoes sharp devaluation. The Argentine government attempts to control the exchange rate, but this often leads to even higher demand for U.S. dollars, further weakening the peso.
Dependence on the U.S. Dollar
Argentina has a strong cultural preference for U.S. dollars, and many Argentines prefer to save in dollars rather than pesos. This has led to a situation where both locals and visitors frequently trade dollars on the black market to access the higher “blue dollar” exchange rate.
A Brief History of the Argentine Peso
Argentina has had multiple versions of its currency over the years. The current peso, introduced in 1992, replaced the “austral” at a rate of 1 peso to 10,000 australes, following years of hyperinflation. The 1992 peso was pegged to the U.S. dollar at a 1:1 rate, which provided stability for nearly a decade. Economic crises and government policies led Argentina to abandon the dollar peg in early 2002, which resulted in a rapid devaluation of the peso. Since then, the peso has experienced ongoing inflation and frequent devaluation, particularly in recent years as the country has struggled with economic instability and debt.
When Argentina abandonned the USD peg in early 2002, the ARS began to drop in value against the USD, an by 2003 it was already at 3:1. (Twenty years later, in early 2023, it would be at 178:1.) Following the election of President Mauricio Macri, the U.S. dollar exchange restrictions in Argentina were removed in December 2015. For a time, the difference between the official exchange rate and the unofficial “blue dollar rate” almost vanished.
On 14 August 2023, the official exchange rate was fixed at 1 USD = 350 ARS. At the same time, the unregulated value of the ARS was around 665 ARS for 1 USD, and by September the USD was being exchanged for over 720 pesos on unregulated markets in Argentina.
Current events – the economic policies of President Javier Milei
On 15 November 2023, the crawling peg was restored. Once President Javier Milei had taken office on December 10, economy minister Luis Caputo changed the official exchange rate to 1 USD = 800 ARS on 12 December, 2023. This was a devaluation of 54%. At the time, the unregulated value of the ARS was around 1 USD = 1,000 ARS. Luis Caputo also announced a monthly devaluation target of 2%.
Since taking office in December 2023, the controversial President Jvaier Milei has been on a mission to strenghten the Argentine economy and improve the currency situation. He is an economist influenced by the Austrian School, and a self-proclaimed admirer of former President Carlos Menem´s policies (Menem was president in1989 -1999, when the new peso was introduced and the currency was pegged to the USD.) Milei has variously been described as a right-wing libertarian, ultra-conservative, ultra-liberal, minarchist, and anarcho-capitalist. His economic policies are rooted in free-market principles, and as president, he has been working towards economic liberalization and the restructuring of government ministries. He is also a vocal critic of Argentina’s Central Bank.
In February 2024, Argentina’s inflation slowed for a second consecutive month, as President Milei pushed for austerity and deregulation. The inflation was 25.5% in December, 20.6% in January, and
13.2% in February. By October 2024, inflation had been brought down to 2.7% – a 3 year low for the peso.
When Milei took office in December 2023, Argentina had been running a budget deficit every year since 2011, averaging over 4% of GDP. Through his reforms, Milei achieved a budget surplus within the first few months of being in office, chiefly by drastically downsizing the Argentine governmental entities. Approximately 20% of federal employees were laid off, which reduced government expensed by almost 20 billion USD.
According to a study by the Pontifical Catholic University of Argentina, the Argentine proverty rate climed to 57% in January 2024, and the increase was attributed to President Milei´s relaxed exchange rate controls. The relaxed controls moved the official ARS/USD exchange rate more inte line with international rates, which lowered the reported purchasing power of Argentinians.
In March 2024, Argentina’s USD-denominated international bonds reached new highs, with the 2029 and 2030 issues getting either close to or at record high prices. In July 2022, the 2030 issue was at a record low 18.125 cents. The 2024 increase is interpreted as investor confidence in President Milei´s ability to successfully improve the economy of Argentina.
In October 2024, President Milei announced the closure of the Argentinian tax agency AFIP. According to numbers published by Bloomberg, 80% of AFIP´s budget for 2024 had been allocated for salary payments. The planned restructuring the Argentinian tax agency into ARCA will lay off roughly 3,000 AFIP agents that had been “irregularly hired” by the previous administration, higher-level positions will be reduced by 45% and lower-level positions by 30%. Remaining senior officials will have their salaries lowered. The combined actions are projected to result in budgetary savings of roughly 6.4 million USD per year.
Tips for Foreigners Visiting Argentina
If you’re planning to visit Argentina, here’s how you can manage your money effectively:
Exchange at the Blue Dollar Rate
Use the “blue dollar” rate or other alternative exchange methods to get a significantly better rate. Many stores and restaurants accept U.S. dollars at the blue dollar rate.
Avoid Exchanging at Airports or Banks
The official rate you’ll find at banks or airport exchange counters will likely be much lower than the blue dollar rate.
Use Cash for Small Purchases
Due to high inflation, smaller denominations are often in short supply, and businesses may prefer cash to avoid transaction fees.
Credit Cards and ATMs
Credit cards are widely accepted in cities, but ATMs can charge high fees and offer lower exchange rates. Bring a mix of cash and cards to ensure flexibility.
Stay Updated on Exchange Rates
The exchange rates can fluctuate daily, so keep track of the current rates to get the most out of your money.
Future Prospects for the Argentine Peso
The Argentine peso’s future remains uncertain, as it largely depends on Argentina’s economic policies, inflation control, and debt management. Argentina’s government continues to grapple with economic reforms and inflation control measures, but the country’s political instability and reliance on international loans makes it a difficult road ahead.
Many analysts believe that without long-term changes in policy, the peso will continue to face devaluation pressures. For now, Argentina remains a vibrant but challenging economic environment, where locals and visitors must adapt to the realities of an ever-shifting currency.