Currency Situation in Argentina | Pseudo Communism Under Kirchner

Currency Situation in Argentina | Pseudo Communism Under Kirchner

The currency situation in Argentina has led me to be thankful for certain things about my home. Canada has never had a military dictatorship, financial collapse, or pseudo-communist government. It also has one of the world’s most stable economies, currencies, and governments. Stability is taken for granted. The exact opposite is true here in Argentina.

In Argentina, however, chaos is taken for granted. When I talk with Argentines over their currency and fiscal problems, I regularly hear “there’s a collapse every ten years.” Which, in general, has been the truth. What has this created? It’s created a culture of distrust in the local currency, the Argentine Peso, and a normality in selling every peso you can for USD or real estate.

This has created the current currency situation in Argentina, which is one of illegality. In mid 2011 the Kirchner government banned foreign currency exchange, essentially putting a big “Closed” sign on the country in regards to international business. This policy created an approximate 20% drop in real estate prices in Buenos Aires in the middle to upper class neighbourhoods, and pushed currency exchange underground.

Trading can't be stopped, even if they try.

Trading can’t be stopped, even if they try.

Porteños (the people of Buenos Aires,) still exchange their pesos for dollars, but now they have to do it in “cuevos” or caves. These are the underground exchange houses that have popped up all over the country out of demand and necessity. In any crisis, there are opportunities that arise. These cuevos, have made for a profitable black market economy to satisfy the necessity of foreign exchange.

This new law, along with Argentina’s hyperinflation, has also made some very interesting circumstances possible. For example, in any country that is functioning properly, a new car bought today is worth much less in one year than today. This isn’t the case here. People invest in cars, because the hyperinflation is higher than the depreciation of a vehicle.

Something that is hard to obtain in present-day Argentina.

Something that is hard to obtain in present-day Argentina.

Another interesting circumstance arising from the currency situation in Argentina is the tendency to put every possible expenditure on an Argentine credit card, especially overseas purchases. You see, the “official” rate for the peso is approximately 4.7, and the black market rate is around 6.4. This spread is widening. While the US dollar is possibly depreciating at about 4%/yr, the peso is depreciating at about 30%. So Argentines, to get around the terrible situation their government has put them in, pay for everything by credit card, pay only minimums, keep their savings in USD, and a year later they’ve paid maybe 20% in interest, but the peso is worth 30% less in purchasing power. If you take into account a widening gap in the real vs black market exchange, you’ve saved over 10% on all your purchases in a year.

The strange part of this whole currency situation in Argentina, is that all of this has been made necessary. Just to escape the hyperinflation and pseudo-Communist practices of the current Argentine government, this craziness has become common practice. Does this sound like a properly functioning economy? No, but sadly this is the reality of today’s Argentina. It’s been just over eleven years since the last collapse. Is the next one imminent? Without change, I believe so.

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  1. Daniela
    May 23, 2013 at 7:22 pm

    Indeed, I live here… It’s true, our economy collapses every 10 years because politicians are more worried about “stealing” than doing something good for the country. Cristina Kirchner particularly is one of the most hypocrite ones. Her people and herself state in all mass media that they always take decisions based on the “ones who have less”, “the poor ones”, yadayadayada… Meanwhile, “Cristina and The Band” live the fancy life, have ridiculously nonsense arguments when it comes to explaining the terrible inflation we have and I personally believe they’re laughing in our faces… Sometimes, what they publicly declare is so “off the wall” that I believe they think we’re all dumb… Do they think they’re running a country full of stupid people who can’t understand what’s happening? Yes.
    They’re so ridiculous that they control not only the “legal” dollar, but also the black market one. They keep rising the interest and taxes because they want more money for themselves and they wanna keep doing business with their own people. They keep repeating they’re here to change things and that they’re against the “giant” mass media corporations. Ok, they changed the Media Law (which was a good thing) but now they’re taking over the media corporations… So they’re doing just the same thing they’re critisizing! How hypocritical is that?
    The worst part is a bunch of people supports this (bad)administration because they think it really makes something good for absolutely everyone… Like they lived in some paralell world or soemthing. And that’s a big advantage for the government, because while this bunch of blind fanatics are supporting the government they keep doing the dirty business… And if you say something against the government then you’ll be tagged as a “miliraty supporter”… (?) and it doesn’t matter if it’s true or not, you’ll still be tagged as a military supporter because that’s the only argument they have, just like children when they don’t know what else to say.
    They will also say “oh, you must be rich if you’re talking like that”… When I actually know and talk everyday to people that don’t have a dime and can’t provide for their family because the money they make is not enough.
    Still, the blind supporters completely forget the Kirchner couple made business under the last dictatorship. According to their faithful fans, that never happened. Documentary research and “investigative journalism” is almost a sin. Even when the ones against the government give proof of how this administration is ruining our country, it’s like it doesn’t exist anyways. They don’t wanna see it, it’s nonsense.
    I could go ooon and oooon but I think we’re basically ruled by a bunch of hooligan clowns.

    • briper
      August 23, 2013 at 6:27 pm

      Yes, sadly this is a common response, which I’ve heard frequently. I feel for the people of Argentina. You and your country have so much to offer the world, and yet the government suffocates anything that could resemble progress. Sad. I can only hope that the frustration that I felt in Argentina drives the change that is so badly needed.

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