
Argentina's Currency Black Market - todsul
https://flightfox.com/tradecraft/argentina-black-market
======
jypepin
Funny 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
Xoom.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)

------
aristus
Venezuela'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
I 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.

~~~
rafaelm
You 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
It 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.

------
aqme28
I 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
That 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
The 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
I thought you pay in advance when you take the bus too. At least that was the
case in the few countries I visited.

~~~
icebraining
No, 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).

~~~
jamesaguilar
I still don't get it. Let's say the real price is 1 peso per mile for both
services. You want to travel 100 miles. On the bus, you pay 100 pesos up
front. In the taxi, the meter is set to one peso per mile. Then you pay 100
pesos at the end. Unless you are going to convert from some other good into
pesos and then pay, the cost is still the same.

~~~
jorgeortiz85
Inflation means that the value of 100 pesos in the future is less than the
value of 100 pesos now. In countries under hyperinflation, supermarkets will
raise their prices several times a day.

"During the Brazilian inflation of the earl 1990s, for instance, supermarket
workers reportedly spent half of their time replacing old price stickers with
new ones." \-- Essentials of Economics

~~~
jamesaguilar
I don't see how it matters if your asset position is identical in either
trial.

------
bedhead
All 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.

~~~
wslh
No, the problem is structural: bad routes, no security, no mobile
infrastructure, no energy (I am not talking about potential energy), bad
education, bad transport of goods between cities. And I am not talking about
corruption yet... you can bribe anybody in a direct way with witnesses around.

You can say that Argentina has all the ingredients to be a first world country
but it is just a hope to be at that point.

For example, since Argentinian security forces don't work as expected, a
shopping center has extra security personnel and on each shop there is another
layer of security guards.

~~~
fennecfoxen
The self-infliction is electing politicians like Kirchner who don't try to
spend time and effort improving their infrastructure and stability and
attracting investment to build new things. Instead, they prefer to borrow
money to deliver handouts to the populace, then when they can't repay the
money, default on their debts and take over the local operations of foreign
firms. (This is before we even get into the suppression of the media and other
overtures of authoritarianism...)

Not that the poorest of Argentinians aren't in great need of some form of aid
like those handouts, but sacrificing the argentinian nation's economic future
works out to be a BAD PLAN in the end.

~~~
zorked
False dichotomy. Brazil has been giving "handouts" \- desperately needed aid
for the poor - and is doing fine. In fact those "handouts" are one of the main
reasons why it has been doing ok: they created a market where there was none.

~~~
meerita
The reality is far from what you say. What they give is nothing in that
economy. Many people just spend that money in 2 days. What Argentina did is
just print money without limits and offer many credit lines to anyone with
possibilities. That's ok, but to a certain level, when you hide the real value
of your coin you're losing investment from outside. Who will invest in
Argentina when the money isn't on the real price?

------
MichaelTieso
Half 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.

~~~
jhandl
The disinformation in this one is strong. It's not illegal nor hard to get
money from ATMs.

~~~
MichaelTieso
Yes, sorry. Internationally you can not take out money from the ATMs.

~~~
zfran
You can. In limiting countries you have a ridiculously low limit, and in
further countries it's a bit higher. I was able to withdraw about €850 in
Europe two weeks ago.

------
JVIDEL
This 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
how 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
This 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-

~~~
JVIDEL
The problem is that nothing ever _gets done_ in this country, the Alianza sole
purpose was to fight corruption and they didn't do anything, the FPV has been
riding the gravy train like the oligarchs did a hundred years ago and just
putting patches on everything.

The military made a disaster but that was almost 40 years ago. Japan was razed
to the ground after a devastating war brought by a military dictatorship and
20 years later they were already considered an economic miracle.

------
janus
Argentina'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
That 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).

------
niico
I'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.

~~~
rafaelm
How 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
Possibly ignorant American here. You have a limit on what you are allowed to
spend on online purchases? How is it enforced and by whom?

~~~
rafaelm
Yes, 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.

~~~
Nicholas_C
I work for a company that does business in Venezuela. Companies that go
through Cadivi have a hard time paying us, the government just doesn't want to
let money out of the country. Doing business with any Venezuelan company
unless it's government owned is an absolute pain. Those that are government
owned, from what I have seen, don't have to go through Cadivi. The strange
thing is, some companies have minimal problems with Cadivi and require a lot
less paperwork, while others have a terrible time getting any USD to us. I'm
guessing some of them are greasing the wheels a little more than others.

~~~
rafaelm
You are not far from the truth. Those companies owned by government officials
and their friends get to buy dollars via Cadivi at the official rate of Bs.6.3
per dollar, while everyone else is stuck buying at the black market rate of
Bs.50 per dollar.

You can imagine how lucrative that is. It's basically a money printer. Buy at
Bs.6.30, sell at Bs.50 then repeat...

But the government tries to blame the inflation and corruption on some
venezuelan tourist that takes their $2500 yearly allowance and finds a way to
convert that to cash.

------
dep_b
Why 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.

------
contingencies
At 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.)

------
jcooper2
I 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
I 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.

------
dysoco
By 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
Thats not a problem, its an opportunity. You are able to pay things in dollars
at a much lower rate than the illegal dollar.

~~~
dysoco
So? It's still more expensive than the official price (of the product), since
I pay 20%+ more.

~~~
conanbatt
The 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.

------
applecore
This explains why bitcoins are so much more expensive in Argentina, then.

------
rafekett
On the plus side, this makes it very pleasant to travel to Argentina if you're
from the US. Just don't forget cash.

~~~
abalashov
As long as you don't get robbed, like I did.

------
conanbatt
One 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.

------
ghshephard
I'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
Citation here: [http://en.mercopress.com/2013/10/21/argentine-central-
bank-l...](http://en.mercopress.com/2013/10/21/argentine-central-bank-losing-
reserves-at-a-rate-of-47.5-million-dollars-per-day) We'll add a link to this
in the post now.

~~~
mikeash
That 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
8 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
The 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.

------
jacobhansen
Some 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-
dollar...](http://thebluemarket.wordpress.com/2012/10/18/bitcoin-dollars-and-
pot-banging-protests-in-argentina/)

------
HackerGarth27
Venezuela, 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!

------
mromanuk
Yes, 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.

------
yetanotherphd
The 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.

------
personlurking
The 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)

------
thehme
Some 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 $$

