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Argentine government economists agree the Peso in over-valued and hurts non primary exports

Thursday, August 23rd 2012 - 01:46 UTC
Full article 6 comments
Economist Hector Valle and member of the YPF board, the current exchange rate only favours commodity exports Economist Hector Valle and member of the YPF board, the current exchange rate only favours commodity exports

Three Argentine economists, particularly close to the government of President Cristina Fernandez have admitted that the Argentine Peso is overvalued and is causing problems for non commodity exports which need to be addressed.

“We have a competitive exchange rate for our primary exports but non competitive for the regional economies and the small and medium sized economies” said Hector Valle who is currently a member of the nationalized YPF board.

However he does not favour an immediate devaluation of the Argentine currency because this would mean a regressive income distribution for the more concentrated groups, added the economist who proposed “an improved policy of tax returns for the export sector, which means in first place collecting the money on time and fully”.

However if the trade surplus situation improves in coming months and next year when debt payments will be at a minimum level and if Argentina manages a surplus of resources it could begin gradually depreciating the Peso to a more market oriented level.

But “we must not only look at the exchange rate but rather the common denominator of the whole situation which is inflation. If parallel to this promotion of exports we are not able to contain inflation, any devaluation process will be sterilized”, underlined Valle.

A week before during a conference on economics and development, the current Argentine ambassador in Paris economist Aldo Ferrer said that “we have several problems with the fiscal balance and international accounts, problems of monetary appreciation and the loss of competitiveness. These are the challenges Argentine faces in the near future”.

Likewise Eduardo Curia, an economist close to the government said that part of the economic problems faced by Argentina are an overvalued US dollar at the official exchange rate and the restrictions for the purchase of foreign currency, which end up impacting on production and demand based on consumption.

“It’s a fact that plays in favour of an economic deceleration and in the manufacturing sector this is felt particularly strong” said Curia and anticipated that the “foreign currency exchange restrictions will not be abandoned unless with a strong devaluation of the Argentine Peso.

Categories: Economy, Politics, Argentina.

Top Comments

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  • Brenda

    “ part of the economic problems faced by Argentina are an overvalued US dollar” should say undervalued US dollar or overvalued peso against the dollar, right?

    Aug 23rd, 2012 - 02:14 am 0
  • JoseAngeldeMonterrey

    Their economist never accepted it, and will never do it, but some countries in South America have been suffering from Dutch Disease, notably Brazil and Argentina, and Chile to a lesser degree, because they have concentrated their exports on natural resources and primary products (commodities) and have seen a decline in their manufacturing sector.

    Wikipedia: ”Revenues from natural resources (or inflows of foreign aid) will make a given nation's currency stronger compared to that of other nations (manifest in an exchange rate), resulting in the nation's other exports becoming more expensive for other countries to buy, making the manufacturing sector less competitive.”

    Aug 23rd, 2012 - 05:12 am 0
  • yankeeboy

    Which will come first; Peso 10/1 or Patacones? I am leaning towards Patacones maybe around the Christmas bonus time....

    Aug 23rd, 2012 - 10:17 am 0
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