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its Peso?
PRESENTED BY:
LILIANA RUAN & SEBASTIAN GOMEZ
Presentation Outline
Background
Statistics
Critical Aspects
Q&A
Liliana Ruan
Background
2nd Largest Country in South
America
Founding Member
United nation
World Bank
World Trade Organization
World Bank:
Middle Income and
Developing Country
Sebastian Gomez
Sebastian Gomez
Statistics
The unemployment rate rose above 20%, the inflation rate reach a
monthly rate of 20% causing a financial crisis that Argentina has
never gone through before.
In an attempt for securing many Argentinian jobs, the unions led
many multinationals to go out of business plus shrinking Argentine
economy by 20 percent over all.
Neighbor countries did not want to buy Argentine agricultural
products since they did not trust the product quality.
Even though the Argentinian peso was rising due to their fixed
exchange rate with the dollar, the amount of international trades was
decreasing on the other side. Companies were filing for bankruptcy at
the same time many goods were reaching unbelievable prices
Many citizens started withdrawing money from their bank accounts
and sending them overseas as a way of protecting their capital. Bank
runs the government fiscal policies which led the country to freeze
bank accounts for 12 months, where only small amounts of money
were allowed to be withdrawn.
At the end of this period and after four years of economic stagnation,
Critical Aspects
Critical Aspects
Sebastian Gomez
Liliana Ruan
Liliana Ruan
Sebastian Gomez
Questions
It improves
competitiveness of
Argentine exports-imports
competing products.
Attraction of foreign
investors and a stimulation
to the economic activity.
Increase in tax revenues
and reduction of the
unemployment rate.
Disadvantages of Devaluation
Liabilities total amount will
increase since most of the
liabilities are denominated in
dollars.
Banking and financials
institutions equity will be
affected due to a lack of
financing opportunities.
The budget deficit increase
and the inflation rate surges
increasing the cost of living.
Advantages of Dollarization
Increase the credibility of
Argentina to foreign
financing.
Helps maintain the stability
in exchange rate
Faster the economy growth.
The increment of
employment opportunities.
Better control of inflation
rates
Disadvantages of Dollarization
Dollarization will result in
high credit cost.
Reduction of investors
trying to diversify their
portfolios.
Government deficit will
incresae and the
governmental revenues will
decrease.
The Argentina peso will be
linked to any USA financial
Q&A