What is the Argentine Peso (ARS)?

What is the Argentine Peso (ARS)?

The Argentine Peso (ARS) is the currency unit for Argentina. The Peso symbol is the same as the dollar sign ($). The Peso is subdivided into centavos; 1 Peso = 100 centavos.

The Argentine Peso is the official currency of the Argentine Republic, which is the largest (by area) Spanish-speaking country in the world. The peso, which is divided into 100 centavos, is designated simply with an ordinary dollar sign.

The foreign exchange market symbol for the Argentine peso is ARS. There have been several versions of the peso over the years. The current version, known as the peso convertible, which debuted in 1992, initially enjoyed a USD/ARS exchange rate of 1:1. It is due to an agreement that Argentina’s central bank – the Central Bank of the Argentine Republic – was able to negotiate with the United States.

However, since that agreement expired in 2001, the relative value of the peso has steadily and substantially declined. As of late 2020, the official exchange rate with the US dollar is 83 pesos = 1 USD. However, the practical reality is that the underground, black market exchange rate is more than twice that high – standing at nearly 200 pesos for one US dollar.

introduction of the Argentine Peso

The Argentine peso began circulation in 1992 following a severe period of economic depression in the country. This economic hardship, which lasted from 1989 to 2002, came less than a decade after Argentina’s larger, “Great Depression”, which lasted between 1974 and 1990.

Initially, the ARS was pegged to the U.S. dollar. After another steep financial crisis in 2001, the central bank abandoned the peg to the U.S. dollar in 2002. The Argentine peso subsequently saw a devaluation of 365% against the U.S. dollar.

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In response, during the early 2000s, the Argentine government took steps to hold the exchange rate in the neighborhood of 3 pesos to 1 U.S. dollar, trying to trigger a boom in exports, and in turn, bring in new money.

 The central bank’s purchases of U.S. dollars in the open market meant the country amassed substantial reserves, which the government of Cristina Fernández de Kirchner eventually depleted in an attempt to prop up the value of the peso.

The election of President Mauricio Macri in 2015 led to a loosening of monetary controls put in place by the previous administration.

In 2016, the central bank removed most restrictions on the amount of savings individuals and companies could convert into U.S. dollars. These moves led to a 30% devaluation of the nuevo peso, fueling renewed inflation fears.

The central bank shifted its monetary policy in response, targeting the year-on-year inflation rate below 5% per annum through 2020.

The Banco Central de la República Argentina now trades directly in the forex (FX) markets to bolster its balance sheet and smooth out fluctuations in the currency’s value.

Successive Argentine Pesos

Argentina has gone through a succession of currencies that have all been labeled “pesos.” In fact, now and again, there was more than one “official” peso in circulation in the country. Even the famous Spanish pieces of eight were at one time, in Argentina, referred to as pesos.

Upon attaining independence in 1816 from its position as a part of the Viceroyalty of Peru, a Spanish provincial district, Argentina’s first official currency included Spanish reales, Portuguese escudos, and Argentina’s own soles. In addition, the currency of neighboring countries was also generally accepted in Argentina.

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In 1826, Argentina issued two paper currencies, both designated as pesos – the peso fuerte and the peso moneda corriente. The peso fuerte was initially pegged at a value of 17 pesos = one Spanish ounce (27 grams) of gold.

The value of the peso moneda corriente was intended to be identical with that of the peso fuerte, but its relative value fell in subsequent years. Both currencies were replaced in 1881 with a single currency, the peso moneda nacional. The initial exchange rate was as follows:

  • 1 peso moneda nacional = 8 reales
  • 1 peso moneda nacional = 1 peso fuerte
  • 1 peso moneda nacional = 25 pesos moneda corriente

The peso moneda nacional was succeeded in 1970 by the peso ley, which was replaced with the peso argentino in 1983, which was in turn replaced by the austral in 1985. The austral was replaced by the current peso, the peso convertible, in 1992, at an exchange rate that reflected Argentina’s ongoing inflation problem: one peso convertible = 10,000 australes.

Pre-History of the Argentine Peso

Historically, the term “peso” first referred to a Spanish coin known as the eight-real coin or “pieces of eight.”

This coin was in use before and after Argentina gained its independence in 1816.

In 1826, the country began to issue paper currency in two formats, the fuete (ARF), and the Moneda Corriente, both denominated in pesos. The fuete could convert to gold, and while the Moneda Corriente did not.

Later in 1881, the Moneda Nacional (ARM) begin to replace the earlier paper, and the use of the Moneda Nacional continued until 1970. The government discontinued the conversion of paper into gold in 1929.

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Between 1970 and 1983, the peso ley (ARL) begin to replace all previous money. Then again, in 1983, the government moved to replace the currency with the peso Argentino (ARP). The peso Argentine struggled to hold its value and was replaced by the Austral (ARA) in 1985, at a rate of 1 Austral to 1,000 pesos.

Argentina went through a period of hyperinflation, and the currency quickly lost its value. Another official currency came into use in 1992, called the peso convertible (ARS). This unit had a one-to-one peg with the U.S. dollar. The fixed exchange rate remained in place until the country experienced a depression in the early 2000s, after which it fluctuated.

The Argentine central bank had worked to shore up the currency’s value against the USD and instituted restrictions on the exchange of the ARS for the USD. These restrictions ended in 2015.