Welcome to Insights on Latin America, a collection of the most significant economic and cryptocurrency developments in Latin America during the past week. This edition covers: The triumph of Javier Milei in Argentina triggering a devaluation storm, and the initiation of Bitso’s transnational institutional payment solution.
Argentina’s Economic Tumult Sparked by Javier Milei’s Victory Leads to Devaluation and Inflation
Javier Milei’s win in Argentina’s primary elections, portrayed as a far-right unconventional figure by the dominant media, has ignited a range of economic repercussions that prompted citizens to find solace in cryptocurrencies and stablecoins. The unforeseen success of Milei has augmented the debate over the potential dollarization of the nation, an aspect considered central to his governmental agenda.
Milei’s scheme for dollarization, encompassing the complete conversion of deposits from public and private sectors into U.S. dollars, would also necessitate the termination of the Central Bank of Argentina. These proposals, coupled with the depreciation of the official U.S. dollar exchange rate, have impelled companies and individuals to safeguard their investments in dollars, catalyzing the Argentine peso’s steep decline, reaching unprecedented lows of nearly 800 pesos per dollar in the unofficial “blue” exchange market.
A significant surge was observed in the demand for U.S. dollar-linked stablecoins, specifically USDT, with trading volumes escalating by 300% and even as much as 500% in some cases, as reported locally.
Opinions on this plan for dollarization vary, with critics arguing that adopting the dollar would deprive Argentina of managing its monetary policy, and supporters contending that dollarization can be a tool to halt devaluation and inflation.
The intensified devaluation has had an impact on inflation forecasts by private companies, now projecting inflation rates as high as 200% for the year 2023. This could constrain or shape the financial strategies of the forthcoming government, which will also have to negotiate the debt with the International Monetary Fund (IMF).
Such an inflation rate would rank Argentina among the nations with the most pronounced inflation globally.
Bitso Unveils Transnational Institutional Payment Solution
Bitso, a cryptocurrency exchange centered on Latin America with headquarters in Mexico, has proclaimed the inauguration of a new service to simplify the execution and receipt of transnational settlements within and to Latin America. Santiago Alvarado, Bitso’s Senior Vice President of Institutional Products, declared:
Through this introduction, our aim is to invigorate the economies of our region, by easing transactions between nations and unlocking trade pathways that enhance the growth and affluence of Latin America.
The pilot phase of the service enabled clients to handle over 160 million dollars from August 7 to August 11, with the vast majority, 80%, of these transactions being finalized between the U.S. and Mexico.
Latam Insights Newsletter
Frequently Asked Questions (FAQs) about fokus keyword: Latin America Economic Insights
What are the key economic consequences of Javier Milei’s victory in Argentina’s primary elections?
Answer: Javier Milei’s victory has led to serious economic consequences including a devaluation maelstrom, increased interest in cryptocurrencies, and intensified discussion on the dollarization of the country. This has also caused a plunge in the Argentine peso and has affected inflation predictions, with forecasts going as high as 200% for 2023.
What is Bitso’s new cross-border institutional payment service?
Answer: Bitso’s new service is aimed at easing the process of making and receiving cross-border settlements from and to Latin America. During the trial phase, over 160 million dollars were transacted, mainly between the U.S. and Mexico. This service is aimed at boosting the economies of the Latin American region by facilitating operations between countries.
How has the Argentine peso been affected by the recent developments in Argentina?
Answer: The Argentine peso reached record lows of almost 800 pesos per dollar on the informal “blue” exchange rate following Javier Milei’s victory. The devaluation of the peso was spurred by Milei’s dollarization plan and the uncertainty it caused, leading companies and individuals to hedge their savings and investments in dollars.
What are the viewpoints on Milei’s dollarization plan?
Answer: The dollarization plan proposed by Javier Milei has both supporters and detractors. Supporters believe that dollarization is a resource that can stop devaluation and inflation in Argentina, while detractors warn that embracing the dollar would leave the country without the means to control its monetary policy.
How has the demand for U.S. dollar-pegged stablecoins like USDT changed?
Answer: Following the economic uncertainty in Argentina, there was a high demand for U.S. dollar-pegged stablecoins, especially USDT. According to local reports, trading volumes rose significantly, by 300% and even up to 500% in some instances.
More about fokus keyword: Latin America Economic Insights
- Javier Milei’s Political Career
- Argentina’s Economic Situation
- Bitso Cryptocurrency Exchange
- Central Bank of Argentina
- International Monetary Fund (IMF) and Argentina
- Cross-Border Payments and Cryptocurrency
- USDT Stablecoin