What Is the ARS (Argentinian Nuevo Peso)?

The ARS (Argentinian Nuevo peso) is the national currency of Argentina and subdivides into 100 centavos. Issuance of banknotes is through the Banco Central de la República Argentina, the country's central bank. The Representation of the ARS is by the symbol "$" or "N$."

Key Takeaways

  • The ARS (Argentinian Nuevo peso) began circulation in 1992 and shortly after the country plunged into an economic depression.
  • 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.
  • According to World Bank data, Argentina continues to face economic headwinds. The country experiences a 40.4% annual inflation rate and has a gross domestic product (GDP) of negative 2.5%, as of 2018, which is the most current year of available data.

Understanding the ARS (Argentinian Nuevo Peso)

The ARS (Argentinian Nuevo peso) began circulation in 1992 and shortly after the country plunged into an economic depression. This hardship, between 1998 and 2002, came on the heels of Argentina's Great Depression which lasted between 1974 and 1990. After another financial crisis in 2001, the central bank abandoned the ARS pegging to the U.S. dollar in 2002. The Nuevo peso saw a devaluation of up to 75 percent which triggered a boom in exports, and, in turn, brought an influx of U.S. dollars.

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.

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 restrictions on the amount of savings individuals and companies could convert into U.S. dollars. These moves led to a 30% devaluation of the peso, fueling inflation fears. The central bank shifted its monetary policy in response, targeting the year-on-year inflation rate, which it seeks to lower to 5 percent per annum by 2020. Implementation of this strategy relies upon the short-term interest rate set by the Argentine Central Bank.

Banco Central de la República Argentina also notes it may trade 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 40.4% annual inflation rate and has a gross domestic product (GDP) of negative 2.5%, as of 2018, which is the most current year of available data.

History of the ARS (Argentinian Nuevo Peso)

Historically, the term peso first referred to a Spanish coin named the eight-real coin. This coinage was in use before Argentina gained independence. In 1826, the country began to issue paper currency in two formats, the fuete (ARF), and the Moneda Corriente with both denominated in the peso. 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. 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 pegging rate 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 worked to shore up the currency's value against the USD and instituted restrictions on the exchange of the ARS for the USD. Restrictions ended in 2015.