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How to spare savings from inflation

The “blue” dollar is on the rise, reaching almost 12 pesos on Friday.
By Francisco Aldaya
for the Herald

The illicit exchange rate could still be the safest bet for those who want dollars

With pesos burning up in wallets and checking accounts, it can be difficult for the average citizen to know what the best strategy might be to preserve the value of any savings and avoid hard-earned cash being eaten away by inflation.

With the “blue” dollar seemingly still on the rise, reaching almost 12 pesos on Friday after breaking several records last week, the illicit exchange rate could still be the safest bet for those who, like many in Argentina, are enamoured with the greenback.

Yet for those willing to take risks, the stock market could also provide some good opportunities for growth. Those who want to take on intermediate risk could see dollar-linked bonds as an attractive option to, at the very least, guard against official depreciation.

“Assets linked to the official rate are the best bet today,” PRO lawmaker and economist Federico Sturzenegger told the Herald.

There are several options to go down this route, including provincial and Buenos Aires City dollar-linked bonds, and dollar-indexed Certificate of Deposit that several banks offer to retail customers.

The interest rate in a three-month Certificate of Deposit trails inflation, but, at 21 percent, it could be a simple option for a non-savvy investor to at least protect against much of the country’s inflation.

A further option are fixed-term bank deposits, which currently offer interest rates of around 18 percent.

For those who are able and willing to wait out a long-term bet, dollar-denominated sovereign bonds could also be an option.

Most financial analysts recommend the stock market, with its implied risks, after a year in which the general value of strictly domestic shares rose 115 percent in pesos.

“I’d say investing in shares (is the way forward) due to the potential that exists,” La Gran Makro economist Agustín D’Attellis said.

“There is potential for financial conditions to improve due to a macro-level re-shuffle. The price agreement, less money printing, revising the subsidies front and less inflation” are relevant factors, D’Attellis added.

But for the average risk-averse citizen, scared about soaring inflation and a depreciating peso, Carta Financiera economist and Behavioural Finance lecturer at San Andrés University Miguel Ángel Boggiano considers that “the best way to defend yourself is clearly buying ’blue’ dollars. I’d say it’s the only way.”

@franma1990

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