Central Bank
The Central Bank doubles 2001’s reserves in nominal terms, but once adjusted for price inflation in imports, they barely surpass the level they had when convertibility fell. The aggravating factor is that the import ratio (percentage of imports relative to the GDP) doubles the one that prevailed in 2001. This demonstrates that the currency crisis that Argentina is suffering now is severe, and demonstrates the need for a change in policy strategy.
VER
The high rate of money creation to finance the growing fiscal deficit has eroded the pesos’ value. Creating the CEDIN, the government is trying to impose an alternative domestic currency denominated in dollar searching to moderate the natural tendency of the population to use dollars instead of pesos. But the chances of success are low, not because of the opposition of some provincial governments, but the lack of confidence in the national government. The same reasons that destroyed the peso are the ones that now put in doubts the viability of the CEDIN.
VER
