BUENOS AIRES: Hard to find but ubiquitous in the mind of the average Argentinian: the US dollar, whose value against the weak peso is the barometer of an economy in crisis.
“Dollars! Change, change, doooolars! The cries of unofficial money changers follow tourists, but also locals, through the streets of the office district in downtown Buenos Aires.
It’s illegal, but it’s part of life: these “arbolitos” (“little trees”, after the “green leaves” they grow) offer a black market rate about twice the official rate.
“It is a service rendered to the community (…) which is part of the normality of the country,” an arbolito told AFP on condition of anonymity.
Nowadays, a dollar is worth about 236 pesos at the unofficial rate or “blue rate”, instead of 130 at an official exchange office.
A year ago, the blue rate was 170 pesos for an official rate of 95.
The peso is Argentina’s official currency, but its high volatility means dollar prices are quoted for big-ticket items, from buying property or a car to renting an apartment or costly medical intervention.
To avoid a hemorrhage of foreign exchange reserves and stabilize the peso, the law has since 2019 prohibited Argentines from buying more than 200 dollars of greenbacks per month.
This, of course, is fueling demand, and Argentinians – also wary of savings accounts – are hoarding as much US currency as they can afford to buy on the street.
Merchandise saleswoman Marcela Leiron said that “like an ant” collects food, she buys dollars, “from 20 to 50 dollars a month, as much as I can”.
Pound appreciates despite record current account deficit
The 56-year-old told AFP she had resigned herself to living in dependence on the dollar “because of the economic mess that no government can fix”.
Black market trading, in turn, is further fueling inflation which hit 60.7% for the year to May – one of the highest rates in the world.
Always buy, never sell
People like Leiron are so in need of dollars that they pay to change pesos even knowing that they will have to change them later to pay for certain goods or services.
“In dual-currency societies like Argentina, where the dollar is the benchmark and…the store of value, people save in dollars,” said economist Andres Wainer of the Latin American Faculty of Social Sciences.
It’s a double-edged sword: people might want a strong dollar because it means their savings are worth more, but at the expense of Argentina’s own economy.
In 2021, economist Nicolas Gadano – a former director of the Central Bank – estimated that Argentines held around $200 billion in banknotes – 10% of all dollars in circulation in the world and a fifth of those outside the United States.
In Buenos Aires, cafes and stores display the rate at which they give change for customers paying in dollars.
The signs are aimed at tourists, because every Argentinian knows never to give up the dollars in hand.
“The trick is to buy, always to buy dollars!” says Marcela, who thinks and counts in greenbacks and has no idea how much her rent is in pesos.
“The Argentinian saves in dollars and when a crisis hits, he sells. He will never regain confidence in the peso,” another arbolito told AFP.
“As long as there is this inflation, it is obvious to operate in dollars. We don’t have a strong currency and inflation under control,” Alejandro Bennazar, president of the Argentine Real Estate Chamber, told AFP.
Despite government attempts to prevent a flight of the dollar, gross foreign exchange reserves fell from $41.5 billion at the end of May – roughly the same level as a year earlier – to $38.1 billion this week.
In recent days, the Central Bank announced measures to limit certain imports to further protect foreign exchange reserves amid rapidly rising food and fuel prices, partly due to the war in Ukraine.
Sociologist Mariana Luzzi, author of a book on the subject, said the dollar was for all Argentines, regardless of their social class, “a key to interpreting the movements of the country’s economy and politics”. .
“We Argentines know very well that if the dollar goes up, it announces difficulties: it will translate into price increases, but more deeply, it means that something important is happening in the economy that the government cannot control.”