With monthly inflation slowing to 2.4%, the Government is considering a reduction in the peso devaluation rate, known as crawling peg, from the current 2% to 1%. This move, although designed to further moderate inflation, could have complex side effects on key sectors of the economy, such as exporters and producers, which already face tight margins due to rising dollar costs.
The reduced peg crawling challenge
As explained by the economist Miguel Kiguel In recent statements, the attempt to reduce the pace of official devaluation poses a delicate balance for the Government. “When the dollar is devalued by 1% and inflation is 2.5%, Argentina becomes more expensive in dollars, which makes it difficult for local products to be competitive.”said Kiguel.
This situation, known as “exchange delay“, has historically been a vulnerability factor for the Argentine economy, since it can lead to an abrupt devaluation correction. “We know that these delays end up being corrected with a jump in the exchange rate, and this happens in any economy in the world”warned the director of Econviews.
Impact on exporters and risks for the productive sector
The reduction of the crawling peg could intensify the difficulties of the export sectors. By reducing the competitiveness of Argentine products in international markets, companies would see their income reduced, which would generate pressure on the Government to compensate for losses through subsidies or financial assistance. However, Kiguel stressed that this type of adjustment takes time and requires carefully planned strategies.
The strategy behind the measure
The Government considers that a lower official devaluation rate will help moderate inflation. According to Kiguel, “if the dollar rises 2% monthly, that establishes a floor for inflation, since imported products adjust their prices in line with the exchange rate. Reducing the crawling peg to 1% could help prevent this effect translates into generalized increases”.
Although the plan seems reasonable in terms of inflation control, it is not without risks. The economist suggested that a too aggressive reduction in the crawling peg could lead the Government to a scenario in which it would have to respond to an uncontrolled increase in the exchange rate in the near future.
The blue dollar: controlled rebound
Regarding the parallel dollar, Kiguel explained that the recent rebound in the blue, after weeks of decline, is not a cause for alarm. “The dollar had fallen too much and is now bouncing a little. This is normal in a free market, especially considering that in neighboring countries such as Brazil, Uruguay and Chile, the dollar had also risen”he detailed.
This adjustment, according to Kiguel, represents a normalization of the exchange rate in the regional context, rather than a sign of imminent volatility.
Economic outlook: lights and shadows
Finally, Kiguel offered an analysis of the general economy. “The recovery that the Government talks about is real, but it comes after a significant drop. We are still below the levels of a year ago,” he said.
In the case of salaries, Kiguel highlighted a slight improvement in real terms compared to recent inflation levels, although he clarified that, on average, income is between 5% and 7% below 2023. Informal workers They face even more difficulties due to the lack of union representation to support their demands.
Source: Ambito
I am an author and journalist who has worked in the entertainment industry for over a decade. I currently work as a news editor at a major news website, and my focus is on covering the latest trends in entertainment. I also write occasional pieces for other outlets, and have authored two books about the entertainment industry.
