Argentine Monetary Issues
Economic chaos, high inflation, and political uncertainty have created a growing hunger for the U.S. dollar and other hard currencies in Argentina. That means a flourishing black market
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News kiosk
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that's easy to access.
By Mark Holston
As Diego (not his real name) thumbs through a stack of crisp 100 peso notes, he comments about his brisk and growing business as a currency trader in Argentina's shadowy black market. His tiny shop is located at the entrance to the pedestrian-only portion of Lavalle, a primary shopping street in the heart of Buenos Aires. Ostensibly a travel agency, it is decorated with posters promoting tours and other tourism services.
But it's the value of his country's battered currency, not packaged excursions to Punta Del Este, that's on the owner's mind. "I can take in up to 10,000 U.S. dollars a day," he says of his operation. "Euros, maybe 3,000 or so. And, we are even trading for the Brazilian real. It's holding its value, and if people can't get dollars, they are very interested in the real."
Next door at a call center, the same kind of discrete transactions take place literally on a minute-to-minute basis. On the street, as a Policia Federal officer lingers nearby, other traders mill about, chanting "Cambio, d�lares, Euros" ("Change, dollars, Euros") to everyone within earshot - although all of the players know that what they are involved in is technically illegal. Foreign visitors want the bargains their discounted pesos can pay for and Argentines are desperate to convert their pesos to dollars and other safer currencies, knowing that tomorrow, the peso will be worth less than it is today.
A Growing Gap Between Official and Black-Market Exchange Rates
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Money changer at work
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A year ago, the U.S. dollar was worth seven pesos on the black market. Today, the unofficial rate has surged past 10 pesos. As the value of the peso continues to erode, the difference between the sanctioned and black market, or the d�lar azul (blue dollar), as it is known in Argentina, grows. Today, it amounts to more than 60%.
A golden opportunity for visitors willing to trade on the black currency market has turned into a financial nightmare for most Argentines. "Having two dollars is complex," says Daniel Hirsch, owner of a firm that produces industrial cutlery. "If you export, you get the official rate, which is only around P$6. But, if you have to purchase some items, you'll have to pay for them with a dollar that's worth P$10. As in all crises, some people do well but others lose."
"If a foreign friend is coming," says Jorge Cazenave, a tourism consultant, "I would advise them to bring cash and would help them exchange it in the black market. We cannot do this with groups or for a large hotel bill, for instance, because that would have an invoice and that is controlled. But the black market for dollars will continue as long as the official rate is the only legal one."
Official Policies Have Little Effect
Argentine President Cristina Fern�ndez de Kirchner recently appointed new officials to revamp the country's fiscal policies. Capital flight has been a major issue, and the hording of U.S. dollars has taken hundreds of millions out of circulation, diminishing the country's foreign reserves. At the same time, inflation is out of control. While the government pegs it at about 25% annually, qualified unofficial observers put it as high as 35%. Among the government's recent moves to stabilize the economy and increase revenues: A 35% federal tax on all credit card purchases made abroad, a 50% tax on vehicles of a certain value, and a price freeze on 200 supermarket staples to lessen the effect of inflation on the poor.
"The government has no idea how to stop the inflation," Cazenave told LBT. "All of the new initiatives, in my opinion will fail, and the black market will still be the refuge for our buying power." Although the government plans to establish an official "tourist dollar" rate, Cazenave believes the black market will continue to flourish.
The Bottom Line for Travelers
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Buenos Aires
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The search for an unoficial "tourism rate," meanwhile, extends even to the city's most expensive hotels, where there's a thirst among well-heeled guests for access to the black market. "Yes," says a concierge at one such elite address, "even the wealthy are looking for a bargain. When they ask, we don't provide specifics, as it is unlawful. But we do direct them to where they can get dependable information."
Visitors should also ask waiters in restaurants and clerks in retail shops if they accept dollars. In many cases they will, although the rate offered will be somewhat less than the black market, where the relative value of the peso and other currencies fluctuate constantly.
It's best, however, not to count on spur-of-the-moment transaction opportunities. When asked if he accepts dollars for the trip from downtown Buenos Aires to the international airport, one entrepreneurial taxi driver quickly produces a laminated sign that reads "Dollars only at the official rate." With the coveted greenbacks for the fare in hand, the savvy driver has pocketed a nice 60% profit.
News kiosk by Mark Holston; Money changer at work by Mark Holston; Buenos Aires, Argentina by Mark Holston
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