Throughout much of the latter half of the twentieth century, Argentina was plagued by a weak currency and high inflation. In 1985, in an effort to fight inflation, which had reached 2,000 percent, the government replaced the nation's traditional currency (the peso) with a new currency called the austral. One austral equaled 1,000 pesos. However, inflation continued to rise. In 1989, inflation reached 5,000 percent, making the nation's currency almost worthless. In response, the government again changed the currency in 1992, replacing the austral with the nuevo peso Argentino (new Argentine peso). One nuevo peso was equal to 10,000 australs. Inflation was finally brought under control when the government fixed the nuevo peso to the dollar at a one-for-one
|Exchange rates: Argentina|
|Argentine peso per US$1|
|Note: The exchange rate is pegged to the US dollar.|
|SOURCE: CIA World Factbook 2001 [ONLINE].|
exchange rate . While this almost completely wiped out inflation, it also meant that the government has little control over the value of its currency. After the currency was pegged to the dollar, it once again became simply known as the "peso."
The Argentine peso is fixed at one-for-one exchange rate with the U.S. dollar. While the dollar fluctuates freely on world markets, it has brought a significant degree of monetary stability to the Argentine currency and economy.
The nation's currency and banking system are over-seen by the Argentine Central Bank, which was established in 1935. The Central Bank maintains currency reserves of US$25 billion, which would cover 9 months of imports. The bank has also arranged a US$7 billion emergency fund that is financed by international organizations and international banks. This fund may be used to protect the nation's financial stability. High interest rates continue to constrain the economy. On average, banks charge 10 percent interest to preferred business customers while consumers pay interest rates of between 15 to 25 percent.
The Buenos Aires Stock Exchange (BASE) was established in 1854. It is the oldest in Latin America. By 1996, BASE had a total market capitalization of US$45 billion and had 147 companies listed. The exchange is dominated by 3 companies—YPF, Telefonica, and Telecom—which together account for 50 percent of the total market.