Argentinian Nuevo Peso (ARS): Overview, History

What Is the Argentine Peso (ARS)?

The Argentine peso, often referred to as the peso, is the national currency of Argentina and its ISO currency code is ARS. The country's central bank, Banco Central de la República Argentina, issues the Argentine peso. It can be subdivided into 100 centavos and is denoted by the symbol "$."

Better known as the Argentine peso, the Argentinian nuevo peso has been in use since 1992 when it replaced the Argentinian austral (ARA), which circulated from 1985 to 1991. The austral replaced the original Argentinian peso (ARP), used briefly from 1983 to 1985.

Understanding 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.

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.

According to World Bank data, Argentina continues to face economic headwinds. The country experiences a 39.8% annual inflation rate and has a gross domestic product (GDP) of negative 9.9%, as of 2020, which is the most current year of available data.

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.

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.