Re: “Gov’t defends ‘value of currency’”By: Elizabeth Briggs, Research Associate at the Council on Hemispheric Affairs
Aníbal Fernández’s comments (May 28) in defense of the recent government restrictions imposed on dollar purchases were misguided, to say the least, because these restrictions will undoubtedly damage the Argentine economy. The dollar remains in high demand due to an overvalued exchange rate and the peso’s inflationary tendencies. As a result, there is a thriving black market for dollars at well above the official exchange rate, which demonstrates the failure of such restrictions to effectively diminish demand.
Preventing the acquisition of dollars may benefit specific domestic industries by increasing demand for products that can be purchased with pesos. However, these restrictions will be detrimental to Argentine consumers because many goods’ prices will rise at a time when many Argentines find themselves under renewed economic stress. Argentines will not “start thinking in pesos,” as Fernández recommends, because many imports will remain significantly cheaper than Argentine products and the foreign currencies required to buy imports remain available on the black market. Implementing a flexible exchange system for the dollar in lieu of increased restrictions would lead to a decrease in the demand for dollars as well as black-market transactions, while also benefiting Argentine consumers.
Research Associate at the Council on Hemispheric Affairs