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Argentina Currency Confusion
When the value of a peso isn't so simple
For the last few years, travelers to Argentina have faced a tough dilemma; how to spend money. Unlike most countries, Argentina has two different exchange rates. The first is the official exchange rate. The official rate is mandated by the government and all banks and businesses must follow it. Currently, the official exchange rate is roughly 190 Argentine Pesos (Arg$) to one US Dollar (USD $). So if you were an American tourist who went to an ATM in Buenos Aires, you could take out 19,000 Pesos and your debit card would get charged about 100 USD. If you went out to dinner and the bill came to 9,500 Pesos, you could pay with a credit card and your credit card would get charged 50 USD. Basically the same as any other country.
But let’s say you were walking down the street and a shady figure approached you and asked if you were American. You reply yes, and the mysterious person offers you 370 Pesos for every US Dollar you are willing to give up. Is this a scam? Will your body be found in Rio de la Plata? To the contrary, you have just found one of Argentina’s cuevas, or black market currency exchanges. People that work on the black market are willing to pay almost double the official rate for US Dollars! This rate is called the Blue Dollar.
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This puts the traveler in a bind. Generally, it is inadvisable to travel abroad holding thousands of dollars in cash. But paying by credit card or using ATMs effectively doubles the price of all goods and services in Argentina! So what’s a traveler to do? The option is to travel with loads of cash and risk being robbed (in a country with a relatively high crime rate) or pay twice as much for every hotel, meal, tour, and taxi ride. Yuck.
Also, how did this happen? Why is it that the Banco de la Nación Argentina will only give you 190 Pesos per US Dollar, but a guy on the street will give you 370? As per usual with Argentina, the answer is poor governance. Some of the democratically elected governments of the past 30 years have not been friendly to business. In 2012, the Argentine government actually seized control of the country’s largest oil company. Basically workers went to their jobs with their private employer one day and became government employees the next. Additionally, to pay its debts, the government will often print money.
The result is that locals don’t trust the Peso very much. Inflation has been a problem off and on for decades, resulting in an inflation rate of 94.8% last year. To put that into context, that means that prices doubled in 2022 alone. For Argentines, this prevents a serious problem. For those that worked hard in 2021 and put 1,000,000 Pesos (about 5,000 USD) into their savings account and left in a bank, by the end of 2022 that money could only buy half as much stuff! So what do Argentines do? They try to get rid of their Pesos as soon as possible and trade for a more stable currency, such as the US Dollar. If everyone is trying to get rid of their Pesos though, then the value of the Peso falls even further.
As a result, various Argentine governments have attempted to keep the value of the Peso artificially high by implementing capital controls, which restrict the ability of residents to trade for US dollars or spend money outside of the country. The government also declared an official exchange rate that all businesses must follow. But because individuals are willing to pay more for US Dollars than the official rate, the black market rate quickly diverged and resulted in the current situation.
This is very bad for tourism. Visitors don’t want to carry around their entire vacation budget, and nobody would use a credit card where the fee was 100%. To address this issue, Argentina’s government finally stepped in and announced that tourists paying with a foreign debit or credit card would get reimbursed at a rate close to the black market value. This “tourist rate” would ideally help bring tourists back to Argentina, as they can now pay with a credit card and not have to pay double the cash rate. Note that this only applied to point of sale purchases; ATMs still use the official rate and need to be avoided at all costs.
The system is a bit clunky. If an American goes to Buenos Aires and buys lunch, their card will initially be charged the official rate, but then several days later they will be credited back some of the purchase price. That means tourists have to take leap of faith when making purchases, but so far it seems to be working.
So visit Argentina - just don’t use an ATM.