Argentina should focus on fiscal spending cuts and a recession rather than adopting the dollar as its currency to address the recent peso crash, according to an economist.
The shift to a dollar-based economy in Argentina following Javier Milei's win in the preliminary elections is expected to bring price stability and potential benefits for the pet food industry, including easier importing and increased foreign investment, although short-term economic instability may lead to lower consumer spending.
The Argentinian peso weakened against the dollar on the black market while stocks rose as investors awaited the approval of Argentina's loan program by the International Monetary Fund (IMF) board, following a staff level agreement in July.
Latin American currencies are under pressure from a strong dollar as traders await remarks from Federal Reserve Chair Jerome Powell on U.S. interest rates, while the Chilean peso reaches a three-week high; meanwhile, Argentina stocks are seen as a "safeguard of value" amid economic turmoil, but the country faces opposition to joining the BRICS bloc.
Argentina's government has announced a series of benefits, including financial aid for pensioners, tax relief for self-employed workers, and funding for farmers, in an attempt to ameliorate the effects of the country's severe economic crisis.
Germany's economy is in a recession, with zero growth since the third quarter of 2022 and a cumulative drop of 0.5% in GDP, which is likely to continue for another half year, impacting other European economies; the country's poor performance can be attributed to its energy policy and investors are also affected.
Argentina is facing the highest triple-digit inflation in over three decades, potentially reaching near 200% by year-end, which is causing increased poverty, anger among voters, and memories of past economic crises.
Venezuela's economy is struggling once again as high inflation, lagging salaries, and decreases in purchases and production of goods take their toll, despite a brief recovery on the back of de-facto dollarization.
Argentina should avoid dollarizing its currency and learn from Ecuador's experience, as it could lead to a prolonged period of economic weakness, according to economist Robin Brooks.
María Barro, a domestic worker in Buenos Aires, supports the idea of dollarizing Argentina's economy as a hedge against inflation and the devaluation of the local peso, but is undecided about voting for libertarian candidate Javier Milei due to his aggressive style; Milei's dollarization plan has sharply divided opinion, with supporters arguing it is a solution to inflation while detractors say it would sacrifice the country's ability to set interest rates and control money circulation.
Most Latin American currencies fell as the dollar strengthened on robust U.S. economic data, with the Mexican peso leading the declines, while Chile's peso gained after the central bank cut its benchmark interest rate and lowered its economic growth forecast for 2023.
Argentina's peso currency is at risk of another devaluation after the upcoming presidential election, with estimates suggesting a 16.6% devaluation in the three months following the vote.
The odds of a recession in the US have collapsed, making markets vulnerable to any signs of the economy overheating and contributing to inflationary pressures.
Argentina's Consumer Price Index likely rose 11.8% in August, the highest monthly figure since 1991, due to a sharp devaluation of the local peso currency and the country's ongoing inflation crisis.
Argentines face daily challenges in trying to find deals and lower prices as the country's inflation skyrockets above 100%, leading to a cost-of-living crisis and increased poverty levels.
Argentina's dollar scarcity should not prevent the country from adopting the dollar as its currency, according to economist Francisco Zalles, who believes that dollars would flow back into Argentina once it makes the switch and that Javier Milei's plan to dollarize would be successful. However, other commentators have warned that adopting the dollar without ample reserves could have catastrophic consequences.
Argentina is facing skyrocketing inflation, with consumer prices soaring by 12.4 percent in August and an annual inflation rate of 124.4 percent, putting the ruling coalition on the defensive ahead of the upcoming presidential race.
Argentina and the International Monetary Fund (IMF) face challenges as the country enters a recession, misses economic targets, and struggles with inflation, prompting calls for stricter conditions and deeper structural reforms from the IMF.
The US economy shows signs of weakness despite pockets of strength, with inflation still above the Fed's 2% target and consumer spending facing challenges ahead, such as the restart of student loan payments and the drain on savings from the pandemic.
Uruguay's central bank governor, Diego Labat, has seen his country's economy detach from its larger neighbor, Argentina, as inflation remains low and the currency remains strong, contrasting sharply with the economic troubles across the border. Labat attributes this shift to strong institutions and political stability in Uruguay, as well as a decrease in economic reliance on Argentina.
Uruguay's central bank is thriving with low inflation, a strong currency, and a pivot towards interest rate easing, while Argentina's economy struggles, highlighting the diverging paths of the two neighboring countries.
Germany is projected to be the most heavily impacted by the global economic slowdown due to higher interest rates and weaker global trade, according to the Organisation for Economic Co-operation and Development (OECD), with its economy likely to shrink this year alongside Argentina and experience a weaker 2024. The slowdown in China, inflationary pressures, and tightening monetary policy are among the factors affecting Germany's growth. The OECD also warned of persistent inflation pressures in various economies and called for central banks to maintain restrictive interest rates until underlying inflationary pressures subside.
