What Is the ARS (Argentinian Nuevo Peso)?

The Argentinian nuevo 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 Argentinian nuevo peso. It can be subdivided into 100 centavos and is denoted by the symbol "$."

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) that was used from 1983 to 1985.

Key Takeaways

  • The ARS (Argentinian Nuevo peso) is the country's official currency that began circulation in 1992, shortly after the country plunged into an economic depression.
  • In the early 2000s, the Argentine government took steps to peg the exchange rate at around 3 pesos to 1 U.S. dollar.
  • According to World Bank data, Argentina continues to face economic uncertainty and high inflation.

Understanding the Argentinian Nuevo Peso

The Argentinian nuevo 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. In the early 2000s, the Argentine government took steps to hold the exchange rate in the neighborhood of 3 pesos to 1 U.S. dollar. The central bank’s purchases of U.S. dollars in the open market meant the country amassed substantial reserves, which the government of President Cristina Fernández de Kirchner eventually depleted in an attempt to prop up the value of the peso.

After another steep financial crisis in 2001, the central bank abandoned the peg to the U.S. dollar in 2002. The Nuevo peso subsequently saw a devaluation of up to 75%, triggering a boom in exports, and, in turn, brought an influx of new U.S. dollars.

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 may trade 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 53.55% annual inflation rate and has a gross domestic product (GDP) of negative 2.19%, as of 2019, which is the most current year of available data.

Pre-History of the Argentinian Nuevo Peso

Historically, the term "peso" first referred to a Spanish coin known as the eight-real coin (or "pieces of eight" -- piezas de ocho). This coin was in use before Argentina gained its independence in 1810. 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. 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 has 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.