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Argentina's Currency Black Market
- HackerGarth27 13y agoVenezuela, Iran and Egypt also have massive currency Black Markets due to similar troubling economic and political undercurrents. Some of Argentina's figures are very surprising!
- aristus 13y agoVenezuela's official rate has been about 1/5 of the black market rate for many years. I remember my wife shooing me into a corner at the airport while she traded dollars for bolivares with the security guards. The differential has caused all kinds of effects. Plane tickets are hard to come by because so many people take advantage of the spread by flying somewhere, buying goods at official, returning for cash then trading at black market. An investment of as little as 500 usd pays for the trip and then some. Officially this does not exist but searching for mercado lechuga (lettuce market) shows a thriving ecosystem.
- pilom 13y agoI took a trip there in 2011 and 1/5 sounds a little off for what tourists could get. Officially at the time $1 would get about 4.5 bolivars. Unofficially, we could get around 7-9 bolivars per $1. We were pissed because we didn't know about the exchange rate issues or the ATM restrictions. We ended up going to a bank every day to withdraw the max on 3 different cards. Probably would have saved about $60/day if we had simply brought a bunch of cash with us.
- aristus 13y agoYou don't know the right people. :) Cash on the street is the way to go but unless you can navigate la vivesa criolla you'll get robbed. I was shooed into the corner because a gringo lookin guy would have killed the deal.
- rafaelm 13y agoYou will always find a Venezuelan who needs or knows somebody who needs to buy dollars at the black market rates! Anyone who comes to Venezuela and exchanges their dollars at the official rate is getting robbed. Of course it can be scary as a tourist if you don't know anyone here.
- pilom 13y agoIt wasn't by choice. We only had $100 in our pockets because we didn't know. In most countries I had been to, its easier to use a card to pay for stuff rather than exchange cash. I figured it would be the same way in Venezuela, I just didn't know.
- crdoconnor 13y agoI was there last year and the rate seemed to be between 9-11.
- rafaelm 13y agoRight now the official rate is Bs.6.3 per dollar. The black market rate is just getting to Bs. 50/$. Thats one of the reasons we are set to have a 50% inflation rate this year. My monthly salary has withered away and as an engineer I'm making just over $200/mo.
- pmelendez 13y agoFellow Venezuelan here (although living outside of the country right now) I have hard times explaining to people how the economy works over there. Most people overestimate how harmful is a regime under foreign currency exchange control. But some metrics like the big mac index (http://www.economist.com/content/big-mac-index http://www.economist.com/content/big-mac-index) can give a rough idea of what is happening.
- warseph 13y agoIn Argentina the Big Mac's price is actually regulated by the government (http://www.slate.com/blogs/moneybox/2012/05/01/why_big_macs_are_cheap_in_argentina.html http://www.slate.com/blogs/moneybox/2012/05/01/why_big_macs_... the prices shown in that menu are about double now, except for the big mac, which is still ~30 pesos). Just another example of how much our government controls metrics here. I'm surprised the same thing doesn't happen in Venezuela, though, as Cristina Fernandez seems to have copied almost her entire "economy model" from Chavez's.
- pmelendez 13y agoWell is hasn't been regulated yet because it is an "imperialist" product hence it is a luxury. But most products are regulated in Venezuela too, and those products are scarcity now because nobody likes to produce without profit and there is not enough money to subsidize all of them and cover the whole demand.
- rafaelm 13y agoMcDonald's has become so expensive here in the last months that it's sometimes cheaper to eat in a relatively decent restaurant. I don't eat in McD but a friend recently had a chicken sandwich, fries, coke and a sundae for close to Bs. 180. It's rid.iculous. At the official rate that's around $30. But at the black market rate that's under $4. Same goes for clothing, electronics, etc. It seems argentina didn't learn from their past hyper inflation or from Venezuela's economic problems...
- niico 13y agoI've been living in Buenos Aires for over 4 years now. The secret for infinite money basically is selling Bitcoins to USD and then selling the USD to Ar$ Pesos. Right now 1 USD = 10.10 Ar Pesos. Here are some references: 1 Bus ticket from 1.50 to 3 Pesos. 1 Bic Mac about 45 pesos. 1 Coca Cola 8 or 9 pesos. 1 Dinner in a medium to fancy restaurant 150 pesos (200+ if you drink wine). If any hacker is in town, let me know.
- justin66 13y ago> The secret for infinite money basically is selling Bitcoins to USD and then selling the USD to Ar$ Pesos. Bitcoins are free?
- AbraKdabra 13y agoNo, you pay them with your electricity bill.
- rafaelm 13y agoHow do you get the $ to buy bit coins? I've been thinking about doing that in Venezuela but we only get $400 per year for online purchases.
- antsar 13y agoPossibly ignorant American here. You have a limit on what you are allowed to spend on online purchases? How is it enforced and by whom?
- maxerickson 13y agoOut of country sites likely won't accept Argentinian pesos, so the enforcement can be done at the level of the banks/money changers (by just requiring them to document who for and why they exchanged some dollars or whatever).
- rafaelm 13y agoYes, it's enforced by the government. Same goes for those travelling abroad. You get a maximum of $2500 per year for travel. The govt office in charge of the control is called cadivi.
- dep_b 13y agoWhy would you trust a government that rigs their inflation figures in such a drastic way that their economists simply refuse to sign for it? If you want people to trust your currency you shouldn't treat them as fools and get the inflation back to more sane levels of 10% or less.
- ghshephard 13y agoI'm wondering about some of these citations: --SNIP-- According to the latest figures, Argentina's Central bank is losing US$ 47.5 million each day from their international reserves. This is the same as US$ 8 million every hour. -- SNIP --
- laumac 13y agoCitation here: http://en.mercopress.com/2013/10/21/argentine-central-bank-losing-reserves-at-a-rate-of-47.5-million-dollars-per-day http://en.mercopress.com/2013/10/21/argentine-central-bank-l... We'll add a link to this in the post now.
- mikeash 13y agoThat doesn't mean it makes sense. $47.5 million/day being the same as $8 million/hour implies that there are 5.9375 hours per day.
- contingencies 13y ago8 hours a day minus an hour for lunch is 7 hours .. perhaps exchange operations close an before the daily close of business? Wouldn't surprise me, and that's ~5.9375 (6 to be precise). Then of course there's bank holidays and weekends...
- marianov 13y agoThe goverment has declared an unprecedented number of holidays last year (i.e. moving holidays from weekends to mondays, declaring "bridge" holidays when a holiday happens on tuesday or thursday, 2012 had 5 more than 2011). 2013 will have 17 bank holidays.
- laumac 13y agoYou're right, it doesn't make sense. We're adjusting our numbers to what the central bank has actually reported here: http://www.bcra.gov.ar http://www.bcra.gov.ar Reserves at 31 Dec were US$43.29b and at 18 Oct were US$34.25 = total loss of US$9.04b. Since there has been 291 actual days in the year up to 18 Oct, the daily loss is $31.08m.
- jcooper2 13y agoI work for a company that does casino/gaming equipment, we recently had to upgrade a cruise-liner that allowed to use onboard credit on the casino floor. Apparently the biggest concern for the staff working on the casino floor was the Argentinean problem. The would take the biggest credit that they could get (this would create net account liquidity problems for the casino department etc). I wanted to look up what the deal was and forgot until this article.
- marquis 13y agoI spent time in Buenos Aires and can attest that people go across to Uruguay, gamble and take back the winnings in US dollars. Also the article said there is just one black market - not true at all, there is a huge underground market for luxury non-Argentian commodities such as Apple computers.
- bedhead 13y agoAll self-inflicted wounds. Argentinians could have a stable currency and a thriving, functional economy - there's nothing structural that's stopping them. But they choose not to, and have been making this choice for they last 100 years or so. It's a true pity.
- jafaku 13y agoThat's like saying Americans could stop the wars.
- dasil003 13y agoIt's self-inflicted in the same way that a mugger stealing your wallet at gunpoint is self-inflicted. After all, you are both citizens of the same country.
- bedhead 13y agoArgentina, for years, has chosen an economic policy something akin to a semi-functional alcoholic. I'm not quite sure what about their economic ideologies are somehow forced upon them despite decade after decade of failure.
- dasil003 13y agoYou don't understand corruption then. High inflation and a low official exchange rate that no one can actually exchange at without insider connections are a way for those with control of the government and currency printing presses to slowly but steadily siphon the wealth of the masses directly to themselves.
- bedhead 13y agoYou're getting the cause and effect mixed up. Is it probably disproportionately worse in Argentina compared to the US? Yeah. But it's not innate in Argentinians. Corruption, generally speaking, is a function of something else, usually something that's inherently unfair or unjust. Argentina's economic policies created these incentives to drive people increasingly towards corruption, not the other way around.
- aqme28 13y agoI remember this little joke about Argentine inflation: It's cheaper to take a taxi than a bus, because in a taxi you pay at the end of the trip.
- Danieru 13y agoThat is a funny joke but after I read it outloud to my friends I got confused. How is it cheaper? One would enter the taxi with pesos. These pesos do not go up in value. Instead the cost of the rides go up. Thus you would want to pay sooner rather than later. Of course there is no joke in saying the bus is cheaper. Unless one entered the taxi with US dollars. Yet in theory the exchange rate should match inflation. To me the joke would only make sense under hyper-deflation.
- nickff 13y agoThe idea is that you are billed a nominal value, whose rate is fixed when you contract the service. Since the rate is always agreed to at the beginning of the trip, the time of payment has an impact on its value. This joke is essentially the opposite of debt deflation (theory of recessions), as described by Irving Fisher;[1] the theory states that the debtor loses money during deflation, causing repayment problems. In the bus/taxi joke, the rider is a debtor, and the taxi driver is a creditor, with the length of the ride being the term of the loan. The inflation is essentially devaluing the loan. [1] http://en.wikipedia.org/wiki/Debt_deflation http://en.wikipedia.org/wiki/Debt_deflation
- csomar 13y agoI thought you pay in advance when you take the bus too. At least that was the case in the few countries I visited.
- icebraining 13y agoNo, you only pay in advance when you take the bus. When you take a cab/taxi, you set the rate in advance, but only pay at the end (when the currency is less valuable).
- contingencies 13y agoAt various locations, large value foreign bills can be exchanged at a rate significantly above the market here in Bangkok. (Obviously, normally a physical exchange business buys below and sells above. In this case they buy above... presumably because certain clients they onsell to want a physically compact means of storing or transmitting a internationally recognized, relatively (to local currency) stable store of value in a semi-anonymous way.)
- janus 13y agoArgentina's currency black market is just an acknowledgement of the actual price of the Peso that countries in the border have. You can LEGALLY exchange 1 US dollar for about 10 ARS in Uruguay http://www.bcu.gub.uy/Paginas/Default.aspx http://www.bcu.gub.uy/Paginas/Default.aspx
- GFischer 13y agoThat causes a constant stream of Argentineans crossing the border. It's extremely profitable on both sides. It's caused a major disruption of commerce here in Uruguay, lots of people go to Buenos Aires to buy stuff (mostly clothing, etc). My girlfriend studies in Buenos Aires because it's cheaper to take the ferry and pay courses in Argentinean pesos than to pay the course in Uruguay ! (plus, Buenos Aires is a much larger city and has a better selection).
- applecore 13y agoThis explains why bitcoins are so much more expensive in Argentina, then.
- MichaelTieso 13y agoHalf of my family is from Buenos Aires and I often go back to visit. It's crazier than you think over there. Not too long ago they made it illegal and very difficult for any Argentinean to take out their own money from the ATM. The government is trying really hard to keep everyone inside the country and only spend money within the country. So for anyone visiting Argentina anytime soon, bring as many US dollars as possible. It almost makes traveling in the country cheap if you black market exchange it. It basically doubles your money.
- Fargren 13y agoAre you talking of the "corralito"? That was over ten years ago, so I'm not sure if that's what you mean by "not too long ago". You make it sound like it's still happening.
- MichaelTieso 13y agoSorry, I had meant internationally.
- Fargren 13y agoNo problem, I see what you mean now.
- jhandl 13y agoThe disinformation in this one is strong. It's not illegal nor hard to get money from ATMs.
- csomar 13y agoI think he meant international ATMs (outside Arg).
- MichaelTieso 13y agoYes, sorry. Internationally you can not take out money from the ATMs.
- rafekett 13y agoOn the plus side, this makes it very pleasant to travel to Argentina if you're from the US. Just don't forget cash.
- abalashov 13y agoAs long as you don't get robbed, like I did.
- jypepin 13y agoFunny to see this post here, since I'm in Buenos Aires for the week, for vacations. I didn't know about that "blu dolar" rate before coming, so I didn't bring any cash with me; I literally had 50$usd, used to pay the taxi from the airport to my Airbnb when I arrived, and then had my friend become crazy when she saw me use my american VISA to pay for things. "You're crazy, it's almost twice as expensive this way!". But it was too late, I didn't have any cash, and no way for me to get any USD - nor getting the black market rate through my credit card. (official rate is 5.88ars/usd, the blue dolar is ~10). Luckily enough, I started to buy bitcoins a few weeks ago, and for the same reasons the "blu dolar" exists here, bitcoin transactions in person/cash are really valued here, because you can guess, it is also really hard/expensive for Argentinians to buy bitcoins online (because of the rate/price of doing bank transfers in USD). So thanks to that, I was able today to arrange a cash transaction through localbitcoins.com - allowing me to sell a few bitcoins at the market price, in Argentinians Pesos, to the "blu rate"!
- tghw 13y agoXoom.com is your friend. You can transfer money from your bank account and pick it up at almost the Blue rate. (Currently, they trade at 1 USD = 8.9633 ARS)
- thehme 13y agoSome people in DC should read this blog post and maybe then, they will start to double thing this whole thing about gov shutdowns, debt ceilings, and the actual harm it can do to the "confidence" in our $$
- mromanuk 13y agoYes, in Argentina we have different dollar/peso parities, the most popular are "Dólar blue" $9,93 per dollar. "Dólar tarjeta" (Credit card, +20% over official exchange rate) 5.89*1,20=$7,068 per dollar. "Conta con Liqui" (local stock market and Wall Street arbitrage) $9,35 per dollar.
- personlurking 13y agoThe Barter (Trueque) Markets in Argentina is also an interesting parallel economy. I'm not sure if they're still happening, though. http://www.youtube.com/watch?v=dsn_cCXHAvE http://www.youtube.com/watch?v=dsn_cCXHAvE
- conanbatt 13y agoOne incredible inconsistency is that credit card companies have to pay their clients'debts in dollars, but have to abide by the central's bank currency rate. For a few months people were going to uruguay and get cash advances on their credit cards, then go back to argentina and sell those dollars. They could make 2-3k pesos per credit card that way, which is basically a minimum wage. In a single day. Lots of restrictions were made to prevent this, but the issue still applies. The saddest part of this office is their lack of understanding of economics and Gresham's law. At this pace it is unavoidable that dollars will flee the country because no-one that can keep dollars instead of pesos will. Honestly, the dollar being 10 pesos is insane. 2 years ago the peso was 4.11 to the dollar. Not to mention that public officials know all the illegal market places and dont shut them down, pointing to a large corruption scheme.
- dysoco 13y agoBy the way, this not only applies to Dollars, but also to other currencies like Euros (Although we barely buy those, since we don't need them). We also have problems buying online, for example, if I buy something on Steam, since the money is going outside of the country, I have to pay 20% more in taxes (I think that's the correct number) although we get the official dollar price.
- conanbatt 13y agoThats not a problem, its an opportunity. You are able to pay things in dollars at a much lower rate than the illegal dollar.
- dysoco 13y agoSo? It's still more expensive than the official price (of the product), since I pay 20%+ more.
- conanbatt 13y agoThe official number is definitely way cheaper than it should be. If it werent, the government would not need to prohibit currency exchanges because the income/outcome of dollars would be balanced. Credit card dollars are a huge opportunity, thats why its becoming the N1 concern for the government.
- JVIDEL 13y agoThis black market the arbolitos (literally "little trees", a joke on individuals selling "green bills" ergo leaves, you get the point) has existed for decades and comes and goes whether currency exchange controls go up. The real black market is the hidden one, the one where millions are moved every day. Just because members of government banned currency exchange doesn't means they and their friends can't buy dollars or other foreign currency, and they do, sometimes subsidized by the government given that they buy at the official rate which is near half that of the real market rate. The only thing keeping this disaster from graduating to hyperinflation is the fact that for the first time in 100 years Argentine exports are back in high demand, back then it was the British and French, now is the Chinese and Indians buying Argentine food products. That source of foreign currency feeds the vaults of the central bank allowing the current government to keep this Jenga-economy from falling apart, let alone stuff their pockets. Ironically 100 years ago Argentina used that money to build its industry, fund the arts, providing top-level education to the population and build its infrastructure, all with the best of the best. Today this new money is being squandered by a government so corrupt it dwarfs even the worst of the early 20th century Argentine elite. The irony is that Argentina is building nothing today, in fact most of the country still lives everyday using the (now decrepit due to age and lack of maintenance) infrastructure created in those days (or with the wealth from those days) meaning this time it will not only repeat the same mistake of depending too much on primary exports but it will leave nothing for future generations.
- chii 13y agohow does this happen? How can wealth be sapped like this over a few decades? is it because of true malice, or incompetenance? What would one do to try and prevent such from happening in one's country?
- Fargren 13y agoThis has been going on since the sixties. Half a century is not "a few decades". The military regime got entangled with fights against the syndicates (which were a strong political force back then, and are mostly toothless now, with the exception of the truck-transport syndicate), and dismantling the national industries was used as a resource to weaken them. Also, they systematically killed and "disappeared" basically anyone who got into politics that didn't agreed with hem. So they destroyed both the economical and the political basis of the country. The people who took over after them came from what survived their culling: most of the people who could have grown with a different point of view were dead. In that light it isn't that surprising that Menem's government in the 90's followed a similar policy of dismantling the local industry. Under the pretense of amassing funds to fight inflation, he basically sold all what remained of the national industries, creating a nice but unsustainable period of wealth. Following that, De la Rua's government basically did nothing to address the issues, and that's how we got to the 2001 crisis. This is obviously not a complete explanation, but it works as a highlight of some of the structural causes of Argentina's situation-
- jacobhansen 13y agoSome argentinians are also using bitcoins to deal with the inflationary peso: http://www.youtube.com/watch?v=e__m-w4N7NI http://www.youtube.com/watch?v=e__m-w4N7NI There is also this post with some more details around how the black dollar market works in Argentina. http://thebluemarket.wordpress.com/2012/10/18/bitcoin-dollars-and-pot-banging-protests-in-argentina/ http://thebluemarket.wordpress.com/2012/10/18/bitcoin-dollar...
- yetanotherphd 13y agoThe situation is simple and tragic. Rather than implementing an honest tax, so that they can pay off foreign debt, the government fixes the exchange rate so that it can pay of its debt for cheaper. However doing so is effectively a hugely distortionary tax on its own citizens.