MercoPress. South Atlantic News Agency

In three decades the Argentine Peso equivalent to one dollar, is now worth less than 5 US cents

Since then inflation in Argentina has reached 435%, and according to John Hopkins University the Argentine Peso became the sixth most devalued currency

Some three decades ago the new Argentine democratically elected government takes office determined to put an end to endemic inflation when not hyperinflation. The new scheme was convertibility, making the Peso equivalent to one US dollar. Following strictly to the book, this meant a tight rein on spending and selling government companies that only accumulated deficits.

The scheme with strong political and public opinion support worked during several years, but it all ended in 2002 in the middle of political chaos.

Since then inflation in Argentina has reached 435%, and according to John Hopkins University the Argentine Peso became the sixth most devalued currency in the world vis-a-vis the greenback, particularly since 2020.

This has meant that the onetime mighty Peso equivalent to a dollar is now hardly worth 5 US cents, (yes five cents).

The convertible Peso replaced the exhausted Austral on January first 1992, based on the one Peso/one Dollar parity, masterminded in 1991 by the incoming Economy minister Domingo Cavallo. It was intended to end decades of Argentine inflation and forget the anemic Austral.

But by 3 January 2002, in the midst of a major political, financial and social upheaval, including looting of stores and rampaging supermarkets, in the last quarter of 2002, Congress put an end to the convertibility and the dream.

Furthermore following on a revolving door of interim presidents, the province of Buenos Aires political chief, Eduardo Duhalde, becomes provisional president and immediately decreed that all debts and deposits in dollars caught during the several days bank holidays would be forcibly converted devalued Pesos.

The fact is that the 1 to 1 scheme was sustainable and functioned as long as the fiscal deficit was zero, but it all blew up when deficits accumulated beginning mid nineties and public spending soared beyond domestic and foreign financing sourcing.

In effect the 2001 Argentine collapse and melting of the economy was one of the worst crisis undergone by the country, with the Peso devaluation reaching almost 400% in a couple of days.

Since 2002, and with convertibility over, accumulated inflation in Argentina soared 435%., and the Peso in the black market, once equivalent to a US dollar, is now worth less than five US cents. The 1 to 1 ratio is now 200 to 1, equivalent to a 20,000% increase.

On the practical side this has meant that the Argentine central bank has had to issue 500 Pesos bills and later in 2017, a thousand Pesos bills. In 2017 a 1,000 Peso bill could be exchanged for US$ 55, but now it hardly makes US$ 5.

According to John Hopkins University Currencies Observatory, the Argentine Peso is currently the world's sixth most devalued currency against the US dollar, behind Venezuela, Lebanon, Zimbabwe, Sudan and Syria.

Consequently Argentines mistrust their currency, hoard and save in US dollars as fast as they can, making the economy of the country bi-monetary. It is estimated that Argentines, besides the billions invested overseas, hold some 170 billion “mattress dollars” mostly in US$ 100 bills.