New Challenges on the Exchange Rate and Inflation Fronts

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New Challenges on the Exchange Rate and Inflation Fronts

Abril 2023

The macroeconomic situation is deteriorating rapidly in Argentina. There is little chance to imagine that it can improve on the way to the elections.  The pressing problem is the lack of reserves, which is a direct consequence of a grossly overvalued currency and the inability to control the spread between the official and the parallel exchange rates.  The drought made things worse, although the Central Bank was already playing at the limit by sustaining a fragile situation mainly by imposing FX restrictions rather than depreciating the currency.  Reserves are now so low that the Central Bank has no margin whatsoever to absorb any type of negative shock.