The way in which the value of the Argentine peso is fixed today “is unconstitutional” and it is up to Congress to act urgently to determine, in accordance with the Constitution, how to establish the Argentine currency on the basis of sovereign criteria.
By Miguel Julio Rodríguez Villafañe
Currency plays a fundamental role in the modern monetary economy of a State, since it is one of the clear manifestations of a nation’s sovereignty and its unity.
In Argentina, the power to issue currency is the power of the National State, and it is the National Congress that is authorised to “stamp currency, fix its value and that of foreign currencies”, (art. 75 inc. 11 C.N.).
At the same time, there is an explicit prohibition for provincial powers to mint coins without the authorisation of the Federal Congress (art. 126 C.N.).
Monetary integration also allows for the development of adequate commercial exchange of the provinces among themselves and with foreign nations, (art. 75 inc. 13 N.C.).
Furthermore, Article 75, paragraph 19 of the National Constitution, when referring to the responsibility of the National Congress, among other basic aspects, establishes the duty of “defending the value of the currency”.
To this must be added the “International Covenant on Economic, Social and Cultural Rights” and the “Covenant on Civil and Political Rights”, of constitutional hierarchy (art. 75 inc. 22 C.N.), which determine that all peoples have the right to self-determination, and in function of this, “provide for their economic, social and cultural development”.
Likewise, the 1994 constitutional reform introduced Article 76, which prohibits Congress from “delegating legislation to the executive branch, except in specific matters of administration or public emergency, with a fixed term for its exercise and within the basis of the delegation established by Congress”.
The constitutional monetary system is complemented by the power of the National Congress to “establish and regulate a federal bank with the power to issue coins”, (art. 75 inc. 6 C.N.).
Thus, the “Carta Orgánica del Banco Central de la República Argentina (BCRA)” (Ley 24.144) provides that it is an autarchic entity whose “primary and fundamental” mission is to promote, among other things, “monetary stability” and “shall develop a monetary and financial policy aimed at safeguarding the functions of money as a store of value”, (art. 3). The bank’s functions are also “f) To establish and execute the exchange rate policy in accordance with the legislation approved by the Honourable Congress of the Nation”, (art. 4).
In January 2002, the National Congress passed Law 25.561 by which it declared “the public emergency in social, economic, administrative, financial and foreign exchange matters, delegating to the National Executive Power the powers included in the law, until 10 December 2003”. In view of the aforementioned powers delegated by the National Congress, the National Executive was empowered “to establish the system that will determine the exchange rate between the peso and foreign currencies, and to dictate exchange regulations”, (art. 2). This emergency law had extensions by Law 27.200 and then by Law 27.345. The latter extended the emergency until December 2019.
But the International Monetary Fund (IMF), in the 2018 Stand By agreement, demanded that the exchange rate should exceed inflation. In this way, it came to determine exchange rate policy in substitution of the National Congress.
Then, Law 27.541 on “Social Solidarity and Productive Reactivation in the framework of the Public Emergency”, of December 2019, does not have any mention of the delegation of Congress made in article 2 of the previous Emergency Law. As a result, the power delegated to the Executive Power to set the value of the currency is non-existent at this time.
The lack of any mention of any delegation for a specific period of time, as Javier Llorens rightly says, “is perfectly in line with what was agreed in the Extended Facilities Agreement with the IMF in 2020, approved by Congress, with reticence in relation to the technical guidelines of the same and the value of the currency, by order of the IMF, must continue to be adjusted above inflation. This, together with the expectations generated by the price of parallel dollars fixed from New York, is the main cause of inflation. This is substantially aggravated by the fact that the Executive Power, without any authorisation from Congress, has generated an exchange chaos, providing for the existence of numerous exchange rates, ranging from an official base value to the same price of parallel dollars, validating an exchange pluriverse that is the real engine of inflation and the unhinging of Argentina’s monetary economy”.
Then, Law 27.668 of March 2022, which approved the latest agreement with the IMF, only did so with respect to the debt, and not to the programme, which it says is a matter for the executive branch. In other words, it did not delegate any power to the executive branch with regard to how to fix the currency, nor did it validate what was imposed by the IMF.
In reality, the value of the CCL (Contado con Liquidación) dollar depends essentially on the price of public foreign debt securities on the New York Stock Exchange, which, to a large extent, is determined by the big investment funds such as Black Rock.
At the same time, this has brought about an inflation caused by the price of parallel dollars, which implied a sort of officialisation of the multiple exchange rates that coexist today in the Argentine economy. Later validated by the government by taking it as a basis for comparison with the official dollar. This ultimately demonstrates that inflation does not only come from the growth of the monetary base and issuance. Moreover, in reality, this leads to a fictitious inflation, but if the dollar falls, prices do not necessarily fall.
Unconstitutional way of fixing the value of the Argentine peso
In view of the above, the current way of fixing the exchange value of our currency with respect to the dollar violates the above-mentioned constitutional norms (art. 31 of the National Constitution).
It is necessary to overcome the messages of some political sectors that directly pretend to assume the US dollar as currency, making us lose the total management of our economic future.
In short, it is urgent that the National Congress, in accordance with the constitutional mandate, determines the way to establish the value of the Argentine monetary sign, based on sovereign criteria, addressed to the BCRA, with precise and objective instructions, for determined periods of time.
*Cordoban constitutional lawyer and opinion journalist.