The dollar in Argentina: six exchange rates to stop the bleeding of the central bank

People walk in front of an exchange office in Buenos Aires (Argentina).Juan Ignacio Roncoroni (EFE)

An old political saying goes: “Argentines think green.” Green is the dollar, and if they think of the US bill it is because they are looking for a refuge for their savings. All governments, whatever their political orientation, try to tame the dollar in the domestic market or, what is the same, support the peso, which insists on sliding in more or less stable cycles for ten years. The formulas varied, but with similar results: Fail.

If a person was born in Argentina and is over 50 years old, he will always live in an economic crisis. The good times are just incubators for the next disaster. And the dollar is right there, like a thermometer for advanced disease. In order not to look far back, let’s think about the ten years of “convertibility,” as Carlos Menem’s government called the 1:1 parity between the peso and the dollar. During the 1990s, the national currency maintained its value against the currency and inflation was flattened. But it all exploded between the end of 2001 and the beginning of 2002, when there weren’t enough dollars left to maintain the price. The dollar went from one to three pesos in a few months. With Kirchnerism there were also years of prosperity, but deficits and indebtedness fueled inflation and the peso gradually lost its value.

Towards the end of Christina Kirchner’s second term, the influx of dollars was continuous and a stock market was implemented. With restrictions, the black market is back, a classic that started in the 1970s. Parallel citation has been called blue, Without anyone explaining well why, it was determined according to the supply and demand of green currency in an informal market, outside legal circles.

When Mauricio Macri came to power in 2015, the official dollar, whose value had been set by the government, could be bought for 9.84 pesos. The blueMeanwhile, it was sold at 14.50 pesos per unit. The gap, another Argentine word, between one and the other was considered at the time, and still is today, evidence of the devaluation tensions that the local currency resisted.

Macri arrived in Casa Rosada and promised to turn Argentina into a “normal country”. Under his liberal vision, this included disarming the exchange rate trap inherited from Kirchner, removing all restrictions on the inflow and outflow of foreign currency, and allowing the exchange rate to float freely. In 2017, in the middle of his tenure, the official dollar and blue They sold for the same value: 19 pesos. The delusion was short-lived. In 2018, markets stopped lending money to Macri, who had to request a financial bailout from the International Monetary Fund to keep dollars draining from the central bank, which fueled the flight abroad into a liberalized market. This is how we come to Alberto Fernandez.

The Peronist government received an official dollar at 63 pesos and a blue At 69.70. The gap was insignificant, but soon everything was worse, even much worse. The collapse of the peso forced the government to tighten exchange restrictions with new and diverse regulations. The corrections applied by the central bank to maintain its reserves have made the foreign exchange market more complicated to the extent that outside Argentina may sound like science fiction. Today, the South American country has six different bids. Besides spreading, traps to evade regulations or simply take advantage of disaster with complex cross operations have also multiplied.

To understand the map a bit more, we provide here a list of the exchange rates currently applied in Argentina.

official dollar

“It’s a rhino,” defines him without enthusiasm a major source from the financial market who will keep his name secret. The official exchange rate is set by the government and is used only to settle imports or pay in small increments for debts contracted abroad by companies. On Friday, the official dollar closed at 136 pesos, a value that lost the race against inflation and is “lagging”, another classic of the Argentine economy. If a dollar saver swaps his bills at a bank window, he gets 136 pesos each. If you want to buy, you can’t.

blue dollar

It is the currency marketed in the “caves” by the “little trees”, as the characters who roam the center of Buenos Aires are called, offering to exchange coins, especially to tourists. The blue It operates outside the legal circle, does not pay taxes, and is as opaque as any agreement between private parties without state control. “40% of the Argentine economy works in black, there are many people whose entire economic life is in bad shape, and if you want to buy dollars, you have to go to blueHe has no other choice,” explains the financial market source. Price blue On Friday it was 338 pesos, up 41% from the beginning of June, and 160% more than the current official selling price. All Argentines look at blue. When triggered, alarms for an impending currency devaluation are activated. It’s the thermometer that measures distrust of a government’s economic policy, and it is, at least today.

save the dollar

The only way to store foreign currency outside the informal market is by saving dollars. The government limited its operations to online banking and $200 per capita. The savings dollar was quoted last Friday at 224 pesos per unit, which is a product of the official value plus 30% of what is called Argentina’s COUNTRY and 35% that is paid at the expense of income tax. The difference between the price of a savings dollar and blue It has grown to 114 pesos, because two fixed taxes are applied to the first and second freely. The savers can then make what is known in the financial market as “mash”. The process is simple. “You buy $200 on the legal market, and sell it to blue On the black market and make a difference that can sometimes leave you between 8000 and 10,000 pesos. It’s an ant business, but if you think a retiree earns at least 35,000 pesos, more and more people are paying to make a mash,” the source explains.

Dollar or Solidarity Card

It is the amount paid by those who consume abroad with credit cards and canceled in Argentina in pesos. When the peso was changed to the official dollar, Argentines resorted to buying all kinds of products online. The bleeding became unsustainable, until the central bank decided to make these operations more expensive. A dollar card is taxed the same way as savings, but the upfront income tax rate is 45%. The problem for the government is that when blue The dollar card is tempting again.

On Friday, those who canceled their overseas credit expenses paid $1 for 238 pesos, a difference of 100 pesos. The only tool the authorities have to stop the influx of foreign currency by credit card is to add new taxes, a race that is losing by the day.

Dollar MEP and CCL

They are different, but they have the same function: they allow companies to get dollars in the legal market to pay off debts. The price of both is very similar. On Friday, the electronic payment market, or MEP, closed in dollars at 315 pesos and cash with settlement, or CCL, at 326 pesos. The first arises from buying bonds on the Buenos Aires stock market for pesos and selling the same title for dollars. The second is exchanging pesos for dollars abroad by buying and selling stocks and debt securities. The difference with the dollar blue Market source says. Both are part of the so-called financial dollars and are increasingly serving as the only source for large companies to obtain foreign currency outside blue.

“Now that blue It is the most expensive price to work as a vacuum cleaner so funders continue to rise. Today’s business buy MEP dollar and sell it blue”, explains the broker, as an example of the movements that arise when disaster gets bigger. Today we have a lot of exchange rates with people trying to make a difference between them, in a chaotic and unfair system. In the future, you will have to try to make them converge, because as long as there are gaps between one of them The other, nothing will be resolved.

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