Argentina′s peso takes a dive | Business| Economy and finance news from a German perspective | DW | 17.12.2015
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Argentina's peso takes a dive

Argentina's national currency has plunged after a government move to scrap foreign exchange restrictions in place since 2011. The devaluation came as a shock to many, but analysts hoped for long-term benefits.

Argentina's peso plunged about 30 percent of its value against the greenback at the start of trade on Thursday a day after the government had announced it would float the currency as part of a larger package of measures to crank up free-market reforms.

The peso's plunge was the biggest one-day devaluation of the country's national currency in decades and shocked average consumers as they saw their purchasing power fall rapidly within hours.

Experts said the big winners of the devaluation were farmers in the Pampas grains belt who would start getting paid in stronger US export dollars.

Pointing to the big picture

Argentines were set to buy dollars denied to them by the former government since 2011 when policymakers clamped down on access to the greenback in a bid to protect central bank reserves.

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But the country's newly-elected president, Mauricio Macri, lived up to his campaign promises and wasted no time to come up with free-market solutions to at least some of the problems haunting the country's stagnating economy.

"Large devaluations tend to be pretty disruptive for gross domestic product in the short term," Renaissance Capital Chief Economist Charlie Robertson said in a statement. "But they are much more helpful in the long term", especially to exporters.

The central bank will have a hard time scrambling for the reserves it will need to keep up with rising dollar demand. To ease the situation, the government has inked a deal with grains exporters to sell $400 million (370 million euros) of produce per day over the next few weeks.

Investors may also be inspired to bring dollars back to the country, should Argentina's "Macrieconomics" prove successful.

hg/nz (Reuters, AFP)

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