International Business: Argentina Currency Crash Impact Report

This report examines the currency crash in Argentina following the newly elected president's decision to devalue the peso. The analysis explores the impact of this devaluation on exports and imports, highlighting how cheaper exports could boost demand and more expensive imports could decrease demand. The report also considers the effects of removing currency controls on international trade and investment, emphasizing the potential for increased foreign investment due to a more competitive market. Furthermore, it discusses how the elimination of restrictions could restore investor confidence and mitigate capital flight. References from Argentina.gob.ar, CNNMoney, and academic journals provide context for understanding the economic implications of these policy changes and their effects on the country's financial landscape and international trade dynamics.

Running head: CURRENCY CRASH IN ARGENTINA
Currency Crash in Argentina
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Discussion
Currency crash in Argentina
The newly elected president of Argentina undertook the currency devaluation in order to
revive the economy (Argentina.gob.ar, 2020). Thus, it led to plunge in currency of peso by 30%
and the government also eliminate the controls from the currency, export and imports of the
country. As there will be less currency control in the country, it is expected that the exporters of
the country may get benefitted from the devaluation of the currency by 30%. Though, the
government scaled up the taxes of the export, which may influence the exporters. In general, the
devaluation of the currency makes the value of the exports cheaper to the foreigners. As a result,
the exports will become more competitive in Argentina and it may push up the demand for the
exports in the country.
There will be effect on the importers of the country as well due to the currency
devaluation. The devaluation of the currency in Argentina will make imported products more
expensive and less attractive. As a result, the country may face a downward trend in the imports
because of decreasing demand for imports (Teimouri & Brooks, 2015). Hence, the importers of
the Argentina may face the consequences of the currency devaluation. On the contrary, as the
government limits the restrictions on the imports and exports of the country, it may result in
higher level of the international trade in Argentina.
The level of devaluation of peso remained higher, which will make Argentina more
attractive place to invest. Therefore, the higher level of currency devaluation may attract more
international investors in the country. The market will become more competitive for the foreign
investments and commercial trade as well (SAlviA, 2015). Previously, the structure of the

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government regulation created blockage to the international investment. The newly elected
government tried to negotiate and eliminate the blockage to investment with the help of currency
devaluation and limiting restrictions on imports and exports. Therefore, it will create a financial
cushion in the country that will negate the adverse impact of the opening of free currency trading
and currency devaluation.
Earlier, the financial restrictions of the country led to the capital flight towards safer
countries. Thus, the local investors was inclined to invest in other countries of the world, which
were safe and attractive place to invest. It damaged the confidence of the investors of the
Argentina on the domestic market. However, the elimination of the restriction will boost the
confidence of the domestic investors. In addition, the investors would prefer to invest in
domestic market of the country as well (Petroff, 2020). It will help to control the capital flight of
the country. However, the investors of the country have worried about the other issues that
resulted in the slower economic growth of the Argentina. As the investments from the domestic
as well as international investors will boost, it will also enhance the confidence on the economy
of the country. Hence, there would be growth in business and international trade.

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References
Argentina.gob.ar. (2020). https://www.argentina.gob.ar/
Petroff, A. (2020). Argentina's currency is crashing by 30%. CNNMoney.
https://money.cnn.com/2015/12/17/news/economy/argentina-peso-fall-currency-peg/
index.html
SAlviA, S. P. (2015). The boom and crisis of the Convertibility Plan in Argentina. Brazilian
Journal of Political Economy, 35(2), 325-342.
Teimouri, S., & Brooks, T. J. (2015). Output recovery after currency crises. Comparative
Economic Studies, 57(1), 75-102.