# Currency Devaluation and Inflation



## kraggy (12 Jun 2007)

Wasn't sure which forum to put this question in but here goes...

Heading to Argentina next month and something struck me when reading about the country.  

During the economic crisis of 2001 when the currency was devalued greatly, i have read that inflation was ridiculously high at over 20% if not higher.

My question is, if inflation was so high (seems to still be higher than say Ireland), how is it so cheap?

i.e. if prices are said to be increasing, how is it so cheap?

thanks for reading a not so important question.

k.


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## room305 (12 Jun 2007)

kraggy said:


> i.e. if prices are said to be increasing, how is it so cheap?



Because they were starting from such a low base? A 26.5% rise in Chinese pork prices does not necessarily imply their pork chops are more expensive than ours.


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## PMU (13 Jun 2007)

kraggy said:


> My question is, if inflation was so high (seems to still be higher than say Ireland), how is it so cheap?.



Because of the exchange rate of the euro to the peso. 

   If you were there say ten years ago Argentina was an expensive destination as the Government had fixed the exchange rate of the currency (the new peso) to the US dollar to stamp out hyperinflation (which it did). This unfortunately resulted in an economic crisis in 2001 for a variety of reasons.  Argentina is good value at present because of the value of the euro vs the peso (i.e. due to exchange rates).  They also have inflation of about 10%, but that shouldn’t price you out of a drink in Café Tortoni http://www.cafetortoni.com.ar/.  Things may be expensive for locals who are paid in pesos but not for euro or dollar spenders.


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