Crisis in Argentina: Investors Massively Convert Pesos to Bitcoins

Argentina, or the Republic of  Argentina, is the second largest country and the third one (after Brazil and Colombia) in terms of population of South America. It’s one of the ten largest countries in the world. Argentina is a member of the UN, IMF, OAS, WTO, G20, Mercosur.

Since the beginning of the 1990s, the country has actively pursued a policy of privatization and the widespread attraction of foreign capital. Entry into Mercosur has expanded opportunities for Argentina. The country is characterized by the predominance of the manufacturing industry. The traditional branches of the light and food industries also figure prominently and are of export importance. An interesting fact is that every year the share of exports of goods and services in the country's GDP decreases. In 2002, it was about 30%, in 2017 it was only 11%. The indicators are in inverse proportion: the higher the level of GDP, the smaller the share of exports in it.

Economic situation as a prerequisite for the development of crypto industry

In 2001, the country experienced a powerful economic crisis and default. During the collapse of the economy, major businessmen and foreign investors transferred their capital out of the country. That action, in turn, affected the growth of social tension. In 2014, there were that the country was on the verge of a new default – insolvency on loans. The Argentine Peso is one of the most volatile currencies in the world. Such economic tensions could not but affect the financial sector of the country – many people would like to keep their savings, and that is why the cryptocurrency industry is actively developing in Argentina.

Despite the approval of the masses, Bitcoin in Argentina is not considered a legal currency, since it is not emitted by the Central Bank, but at the same time no restrictions are made on it. Mining and cryptocurrency exchange are also legal. According to the Civil Code of Argentina, Bitcoin is considered a commodity, and operations with it are governed by the rules of the Civil Code.

When the national currency fails

It is being discussed that the president of Argentina, Mauricio MACRI, considers Bitcoin or other cryptocurrency as a reserve. A bit earlier, in March 2019, investor Tim DRAPER publicly  gave such advice to the country's political elites. Today, the president is becoming increasingly unpopular with the people as he has failed to tackle financial problems. Nevertheless, he is running for re-election in October 2019. It is also known that the former President of Argentina Cristina Fernández de KIRCHNER will run for the post of Vice President along with Alberto Fernández, the former head of her cabinet, despite legal proceedings against her. Will the cryptocurrency and its legal status become an instrument of political struggle in Argentina? Everything is possible.

Many investors fear that if Kirchner succeeds, she will return populism to the country. Everyone remembers the restrictive practice, and therefore more people began to convert the peso into currencies such as US dollars and Bitcoin. As a result, the value of BTC and its trade volumes reached record highs in relation to the Argentine peso.

Bitcoin is a better value storage than pesos, says Josu SAN MARTIN, a partner at Sixtant:

If an Argentinian had bought Bitcoin at the highest point of the "biggest bubble in history", in 2017, he would have been better off than leaving his money in his Argentinian bank account. So tell me again how Bitcoin is a horrible store of value. pic.twitter.com/55YuAi9vD4

— Josu San Martin (@josusanmartin) 19 мая 2019 г.

 

Officially, in March 2019, the annual inflation rate in Argentina reached more than 55%. Some sources claim that in reality this figure exceeds 80%. Such a high level of inflation undermines the purchasing power of the peso to such an extent that its replacement with a cryptocurrency to save the Argentine economy no longer seems like a crazy idea.

Image courtesy of Altcoin Buzz