As the election year approaches, a recurring debate about the Argentine economy is once again taking center stage among market experts.
Will the government allow the dollar-peso exchange rate to continue rising and thereby lower interest rates, or, conversely, maintain high yields in pesos in order to avoid capital flight to the U.S. dollar?
This debate is an intrinsic part of the country’s electoral cycles. Among other reasons, because reigniting the economy and stimulating consumption through lower interest rates on peso-denominated loans and bonds has been a way for governments to improve electoral prospects.
Keeping the dollar stable, a key anchor to keep Argentina’s high inflation in check, however, has also been used as an electoral strategy.
The novelty in this case is the timing.
