According to Morgan Stanley, the devaluation could occur during the first months of 2022. Bank analysts rule out that there will also be a reduction in public spending.
A private report from bank and investment company Morgan Stanley indicates that Argentina plans to devalue its national fiat currency. That could happen after the legislative elections that will take place on November 14th.
Economists Fernando Sedano and Lucas Almeida, who signed the analysis, say that it is difficult to make this political decision. They consider that it would lead to a peak of inflation before the end of the year, a usually sensitive period from a social viewpoint.
That led the specialists to assume that the devaluation will occur early next year. The economists argue that the magnitude of the movement is difficult to predict, but something similar to 2014 may happen. They refer to the devaluation of 15% in just three days at the beginning of that year.
The Minister of Economy Denies Expectations of a Devaluation
The report adds that Morgan Stanley would like a fiscal account consolidation to accompany the decision. However, this may not happen by reducing public spending. The investment firm says that the current government is prone to further state intervention. Besides, they do not expect a relaxation in the tax burden, which is bad for investment.
In that sense, Argentine Minister of Economy, Martín Guzmán, recently said that the idea is not to have low taxes and low public spending.
However, Guzmán denied that there are expectations of a devaluation after the elections. He added that it is essential to be reliable and bring peace of mind to people. Likewise, he blamed the former president of Argentina, Mauricio Macri, for causing a problem of shortage of US dollars.
Other analysts, such as the head of the brokerage firm Bull Market Brokers, Ramiro Marra, broadly agree with Morgan Stanley. He argues that the devaluation could occur long before the November elections.
So far in June, the price of the free-market dollar (or “dólar blue”) has increased by 6%, measured in Argentine pesos (ARS). It has gone from ARS 156 per unit to USD 166 pesos per unit.
The Way to Escape Devaluation in Argentina
The national fiat currency has not allowed Argentines to save, leading them to buy US dollars to preserve their assets. Currently, government restrictions on access to foreign currencies make this practice increasingly hard.
Some Argentines see Bitcoin (BTC) and other cryptocurrencies as tools to store value. For example, the price of Bitcoin has increased by almost 12 times, measured in Argentine pesos, in the last two years. In that period, the cryptocurrency went from ARS 477,000 per unit to ARS 5,549,000 per unit.
Those who do not want to endure the volatility that Bitcoin usually experiences for short periods can save on stablecoins. These tokens maintain parity with another asset, generally the US dollar. The most popular stablecoins are DAI, USD Tether (USDT), USD Coin (USDC), Binance Coin (BUSD), and Paxos Standard (PAX).
By Alexander Salazar
