Question

How does the peso devaluation affect importers located in Argentina?

Answer 1

Answer :

In terms of exports, imports, domestic goods, jobs, and long-term economic development the current devaluating peso by around 50 percent is projected to dramatically impact the Argentinean economy. This new rate represents a devaluation of around 50 percent on one day, which will make Argentina more attractive and competitive for foreign trade and investment. Although it will have a favorable effect on exports, it will make its imports costlier, because it has to pay more pesos for the same quantity and value of goods now. For instance, if an Argentinian company buys US$ 1,000 of shoes, it will have to pay 70,000 pesos in place of paying 50 000 pesos before the devaluation. The Argentine economy would possibly see some change next year, but investors have anticipated the majority of the issues that have hindered the economy to be difficult to resolve. It would also raise peso volatility, reducing the confidence of foreign investors and decreasing the value of their investments and making it more costly for Argentinean investors looking to invest abroad. Devaluation of the peso in Argentina would have negative effects on importers.