What is the blue dollar and why does its price rise and fall?

(CNN Spanish) – Blue dollar, parallel dollar, unofficial dollar. If you’ve been following Argentina’s economic news — or if you’re planning a trip to the South American country — you’ve undoubtedly come across some of these expressions. And they all mean the same thing: they determine which American currency is circulated outside the official circle: it can be said that it is the black market, but in the case of Argentina it is the street dollar.

The blue dollar, unfortunately famous in the modern history of Argentina

The Chequeado website explains that the blue dollar is always there to the point that there are people who want to make purchases and sales outside the official market. However, in some periods of Argentina’s recent history, where citizens’ ability to purchase dollars was legally restricted, it became more important.

The first was 2011, when then-president Cristina Fernandez de Kirchner created the so-called stock exchange. In 2019, six days into his presidency, Mauricio Macri raised the stock. But after four years he imposed it again. That was a second teacher.

In the current government, headed by Alberto Fernandez, the ministry added “a 30% tax (Tax for Argentina’s Inclusiveness and Solidarity, PAIS) and a 35% rebate on the income tax account, as well as a series of prohibitions on dollar purchases from the bank due to different situations,” explains Chequeado.

Because of the traps, which are precisely the limits on the amount of dollars that people can earn on the official market, Argentine citizens who want to get dollars go to the black market, where in these circumstances the price is less useful than the official price (dollars are more expensive), but no There are restrictions.

Choir in Florida Pedestrians

“Change, change, change.” When you walk along the famous pedestrian street Florida, in the city of Buenos Aires, you hear these words endlessly. After a while, a chorus of voices seems to be making the same offer to you from different places: to sell them your dollars.

And the opposite situation happens for tourists arriving in the country: a blue dollar is the most suitable price for them because if they so choose, they will now get more pesos for every US dollar.

The rise and fall of the blue dollar

How can the blue dollar swing? Analysts consulted by CNN Argentina say the answer will always be given in a context where at least three factors are combined.

One is high inflation, which has accumulated so far this year at 36.2%, according to INDEC, and is on track to be one of the highest in the region.

The second factor is the heavy issuance of peso to fund Treasury spending and bond redemption. Eugenio Marie, an economist at Fundación Libertad y Progreso, made this point in analyzing the foreign exchange market. According to him, the differences respond to two factors. The first is the “growing distrust of the peso and the government’s ability to move towards risk-reducing macroeconomic balances” and the other is the “festival of monetary issues implemented by the central bank, which has flooded the peso market, and it is logical that it is making its value depreciate.” In other words, supply and demand.

It is also necessary to mention the measures to cut off access to the official dollar for importers, who are forced to buy foreign currency on the informal market, which increases pressure on the price of this dollar, as cNN-Argentina explains.

“Price is often a state of mind”

After Martin Guzman resigned from the Ministry of Economy, the price of the blue dollar rose by about 9%. This difference, according to the analysis by financial specialist Claudio Zucowicky on CNN, explains the psychological factor that affects the price.

“The dollar has no technical value, and prices are often a state of mind,” he said. He illustrated this with an example far from the dollar. How much is the boat worth? Say, say, $10,000. But what is the value of the boat next to the Titanic when it sinks? Undoubtedly much more than that. This shows that value is relative and that fear plays a role.

“Uncertainty is worse than bad. When you have that level of uncertainty, you seek to cover yourself as best you can,” he said after changing the economy portfolio assumed by Sylvia Patakis. This can mean “as much as possible” holding inventory rather than selling it in the case of companies and industries and trying to save dollars if you are an employee.

Fernando Losada, chief emerging markets economist in Oppenheimer, New York, recently told CNN that the depreciation of the Argentine peso “specifically indicates a lack of confidence” in the government’s economic strategy, so “residents flee the peso to take refuge in whatever else the population thinks it offers.” They have a better store of value.

With information from Ignacio Grimaldi, Juan Pablo Varschi, Nacho Giron and Emiliano Jimenez of CNN.

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