What is the exchange rate?

The expression exchange stock is used to designate the restriction on the consumption of the divided from another country. The main reason for applying an exchange rate cap is the fear that the local currency will devalue in the face of excessive demand for a foreign currency.

When applying an exchange rate cap, a series of measures are actually applied, all of them aimed at reducing the consumption of foreign currency in the country, avoiding capital outflows, the devaluation of the local currency and inflation, although the application of a currency bond exchange rate usually results in the appearance of a black market in which the currency object of the stocks is exchanged in an unofficial way.

Origin of the foreign exchange stocks

The exchange cap was born in Argentina in 2011, under the presidency of Cristina Fernández de Kirchner, at which time an exchange cap is applied to the dollar. As a main measure, a drastic reduction in the exchange of foreign currency was introduced in order to try to avoid the incessant flight of capital that the country suffered.

From that moment, Argentines who wanted to acquire dollars had to request authorization from the Federal Administration of Public Revenues or AFIP, the body responsible for the application of the exchange rate.

The application of the exchange rate cap did not serve its purpose and also caused a large increase in the inflationAlthough, without a doubt, the most striking thing was the appearance of a parallel exchange rate: the so-called Blue Dollar, an unofficial exchange rate used in the black market in which the dollar's prices were double the official values.

The exchange cap and the limitations on currency exchange in dollars were applied in Argentina until 2015, the year in which President Mauricio Macri eliminated it, fulfilling one of the promises of his electoral program.

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