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I admit that I had a few nights where I couldn’t sleep… Now, as they say, I’ve gotten older, and nothing really worries me anymore! I think that once you’ve adapted to the economy in Argentina, you can adapt to any situation imaginable!
The country of cash
For any tourist, an average traveler who arrives in Argentina, in general it does not take very long to feel that they’ll quickly have to leave their bearings and the financial habits of a so-called “normal” country.
You’ll quickly notice that cash is widely used in Argentina. In fact, many Argentines pay for many things with bills. Why is that? There are two main reasons in my opinion: The first is that there are very often discounts when paying in cash (around 10%), and in cash without a bill (around 20%)! The second reason is, I think, because a lot of Argentines get paid in cash themselves, so they have to “spend” this cash.
Argentina is so synonymous with cash, that real estate sales are also done in cash, all in front of a notary who will facilitate the cash machine to verify the amounts more easily! It’s a big “cash” economy, in which everyone handles cash, because no one trusts the banking system.
This is a whole section of the economy that escapes the control of the State. Argentines have so little trust in the people who govern them that I would venture to write that cheating has even become a national sport here. Indeed, being honest and declaring everything in Argentina is not at all advantageous, quite the contrary… It’s a country where the rules are different than elsewhere, and even if the State is structured, the system (still) has major weaknesses.
But the Argentine tax authorities, the AFIP, are nevertheless vigilant and Argentines are terrified of it, to the point that it’s better to buy or finalize a deal anonymously, so if you can avoid bills, it’s better. Also, when you go to talk a little with the Argentines during a stay in Argentina, you’ll quickly hear certain words and expressions that come up often, and that will seem a little “strange” to you. For example: parallel exchange, dollar or euro “blue”, cuevas, sepo, inflation, devaluation, international monetary fund, public debt, debit card, cuotas, descuento, and so on…
Argentines will all tell you that their country is great, rich, generous, that the food is very good, that you can find all the landscapes you can imagine, but that the great evil of this country is the economy, the politics and the politicians. Any self-respecting Argentine will then be able to explain to you how to repay the International Monetary Fund (IMF) and stop inflation.
All Argentines have the reflex to look at the dollar rate (USD) every day, while the national currency is the Argentine peso (ARS). All Argentines, from the baker to the business owner, know exactly how much the dollar is compared to the Argentine peso. In general, the dollar rate rises compared to the peso rate, and often in fits and starts.
It’s also important to know that the country’s economy is constantly changing, depending mainly on the party that governs and the rules that are put in place. Depending on the different trends in power, the rate of the peso varies greatly, the official exchange rate as well as the parallel, and economic strategies must therefore follow. It’s therefore always necessary to anticipate the crazy race of the dollar against the peso.
For example, it happens that over a few days, the Argentine peso devalues sharply and in general the prices are not updated immediately, so it will be the ideal time to change dollars and make large purchases. In fact, you have to get ahead of the dollar rate and inflation in general. The rate can vary to such an extent that sometimes a simple speech, the appointment of a person to a government position, or even a law put in place, can have immediate repercussions on the exchange rate. It’s incredible but that’s how it is, and just when we have the impression that the dollar rate is stabilizing, that’s when it starts to rise again!
Argentines often capitalize by buying dollars and keeping this precious currency under the mattress, or in a safe. The last place where Argentines will keep their savings, is of course the Bank! Everyone plays this little game, each on their own scale of course…
The Argentine banking system is very fluid and practical. Indeed, opening a bank account takes 5 minutes, transfers and other banking operations are easy to carry out and all merchants, or individuals, can have a “postnet” to collect payments by debit or credit cards. The problem is the currency, the Argentine peso, which is not worth much, and the exchange rate is very bad in neighboring countries, because no one wants it.
The different exchange rates and the famous “Cepo”
Argentina is also characterized by the different exchange rates that we find, I quote the most used ones. Note that some exchange rates can see the light of day as quickly as they can disappear. For example, the Qatar exchange which was applied around the 2022 World Cup.
The official exchange is the one you’ll see on the internet, it’s the central bank exchange rate which is generally stable, except that from time to time, it can undergo a large devaluation (being able to be devalued by 30 to 70% suddenly!).
The Blue exchange is the so-called parallel exchange, which is exchanged for you on the black market. It’s in fact what the dollar is really worth compared to the Argentine peso. Everyone uses this exchange rate to really know the value of things. It’s unofficial but it’s this exchange rate that everyone talks about or refers to. It’s a parallel exchange but known by everyone (the media, politicians, authorities, etc.).
There’s always a parallel exchange, but it may be equal to or even less than the official exchange, and it may also be worth double or more than the official exchange.
The MEP exchange is the so-called exchange rate of the stock market. It’s an exchange rate that is not used too much, except in the import/export sector, because it’s generally this exchange rate that is taken into account. For you, as a tourist, this is the rate that should apply if you pay with an international credit card. But this can change, previously the official exchange rate applied while the blue exchange rate was worth double! (so find out about the current policy before paying by card).
The Turista exchange is the exchange rate that applies to Argentines who use their credit cards abroad. It generally corresponds (but this also changes all the time) to the official rate with a 30% tax added.
Linked to these exchange rates, there is the famous “Cepo”, a very strange word that is nevertheless at the center of the Argentine economy. The Cepo is in fact a kind of lock that prevents Argentines from freely buying dollars at the bank. Argentines are therefore limited, and these amounts vary all the time (yes, it would be too simple otherwise), but in summary there’s a big limitation. Why, you might ask? Well, quite simply because the central bank does not have enough reserves in dollars to be able to meet a possible strong and legitimate demand from Argentines.
So, if an Argentine wants to buy a lot of dollars, without being limited, he’ll be forced to buy through the parallel market, at a rate that will not necessarily be advantageous for him. Argentines invest their savings in a currency (the dollar) that is indirectly taxed by a parallel market created by the State, and that will be kept in safes or under the mattress, because Argentines have no confidence in the banking system of their country. All this liquidity is not controlled by the coffers of the State, which nevertheless represents a whole section of the Argentine economy.
Devaluation / Inflation
For sixty years, in Argentina, two words have gone hand in hand: devaluation and inflation. I can tell you right away that here, we don’t mince our words when we talk about these things…
The Argentine currency has, for 70 years, the bad tendency to devalue itself all the time, with in parallel galloping inflation, inflation so crazy sometimes that the price of an item could vary between the moment of choosing it in store and the time of going to the checkout! In 2022 for example, inflation reached almost 95%! Unheard of…
There are always excuses in Argentina to justify the increase in prices. In general, it’s because the currency is devalued, the dollar’s contribution increases, although it’s often difficult to understand the relationship between the rise of the dollar and that of the price of a coffee, or a packet of pasta for example. If the dollar is stable, prices still increase, because the future is uncertain, or because there are presidential elections coming up, or because the governor of a province has put a new law in place, and so on…
So, prices often rise to anticipate an uncertain future, to compensate for something that no one can exactly imagine. I think that the increase in prices has become something normal, like a habit, a reflex that traders have taken for example. To this backdrop, we must add major financial crises, banks that file for bankruptcy, corruption everywhere, credits at astronomical rates, presidents who flee in helicopters abandoning their country…
The money machine is producing more and more bills, because the devaluation is accelerating. When I moved here in 2003, a dollar was worth about 3 pesos, today it’s worth 1,300 pesos as I write these lines. The highest denomination banknote at the time was 100 pesos, while today 100 pesos is nothing, it’s not even worth a candy, and the largest banknote is the 2,000 peso one, or about 1.50 euros… I let you imagine the size of the bundles of bills if you are required to change 500 euros for example!
The last thing to do in Argentina is to keep pesos for too long, because you lose purchasing power very, very quickly. That’s why Argentines buy dollars, or spend everything! Either in the good times of life such as travel, restaurants, outings, or for those who can, buy a car, a motorcycle… anything that is possible and imaginable to acquire, and which will allow them to make a good deal the day they resell.
Yes, Argentina must be the only country in the world where you’ll resell a car for more than its purchase price, after having used it for several years for example! But you’ll have to see at the end what you can buy with the new market values. So a car, a motorboat, a motorcycle, are pleasures that are mixed with investments as well, and no one can bet on the near future, long-term projections are impossible.
Las Cuevas
Finally, there are these famous “Cuevas” (literal translation = “caves”) or in a more elegant vocabulary “financial institutions” that always arrange your life and find solutions for everything. Apart from changing currencies at parallel exchange rates (and official exchange rates for those not used to it), the Cuevas offer the possibility to Argentines (and foreigners) who have savings in accounts outside the country, to be able to repatriate this money via third-party accounts, without appearing anywhere, without signing a paper, without showing any identity documents, because this whole network works between regulars or by recommendations.
A completely anonymous transaction that costs about 3% of the transfer value, which is not much, especially if you cannot justify the origin of the funds, or if you do not want to declare these amounts. And of course, upon arrival you get the amount back in cash! (in dollar or euro bills on request). These transactions are also possible in the opposite direction, from the “Cueva” to an account outside the country.
The picture is therefore bleak for the middle working classes of Argentina, but, thanks to this economy, it’s a country that also allows those who dare or who have the “faith”… and some means, to make quick and very interesting financial somersaults. A real estate investment will also very often bring in much more here than elsewhere, because many rents will be collected in cash. Paying with cash is common in Argentina, everyone is happy, the one who collects of course because there is nothing to declare, and the one who pays because he does not appear anywhere…
My conclusion on this vast subject
Analyzing the Argentine economy is a bit of a Holy Grail for a student in a high school of economics, or for a seasoned economist, because it’s probably the only country in the world that works this way. Moreover, renowned economists follow one another with very different methods, ideas and guidelines, but it’s clear that the dollar is still undeniably gaining ground, and to this day no one has managed to find the miracle cure!!!
Knowing all this, we understand why Argentines have all these abilities that are unique to them, to be able to adapt easily, to know how to reinvent themselves, to be positive in the face of any unforeseen event, to put things into perspective with good humor and to have a lot of imagination. They are often people actively sought after by large companies, for all these abilities and qualities that Argentines have in them naturally.
This whole side of the country as a tourist will not affect you much, but it’s important to understand how it all works because it’s part of the Argentine DNA. Also, even if many Argentines complain (some rightly so), many travel all over the world… Note for example that during the last two football World Cups, as a reminder in Russia and Qatar, the first nationality in number to be present in the stadiums was Argentina. And yet geographically speaking, these two World Cups took place very far from South America. Moreover, I think many will remember that during the famous 2022 final, the football stadium was almost dressed in the colors of Argentina.
In Europe, where everything is done so that you can pay by credit card, quickly, even for a simple baguette, it’s the opposite of Argentina. Besides, who today in France for example, has more than 50 euros in their wallet in everyday life? Conversely, in Argentina we travel with a backpack or with the famous plastic bags filled with banknotes. Indeed, you must always travel with cash to negotiate the best rate and not miss a good deal.
In addition, I’ll let you guess which country in the world has the most 500 euro bills in free circulation? In Argentina, there is still this great freedom, to be able to feel the bills, to see what all this cash looks like, and above all it leaves the possibility of not leaving too many traces and not living completely controlled. Indeed, the so-called progress of the first world has led all citizens towards a total loss of freedom of action and anonymity in their financial choices.
So, for those who would like to expatriate to Argentina, if you are gamblers, if you like adrenaline, risk, living day by day, getting out of the system… well this country is made for you, you’ll love it! For the others, it’s better to move on because it can be very anxiety-provoking…
Taking into account all this context, it’s absolutely impossible to project oneself more than two months in Argentina. Whether economically speaking or in a life projection. It’s a world where one must live “without nets” and where everything is possible, the best as well as the worst.