A crash course in Argentinian economics

All I knew about Argentina’s economy before arriving was that despite once being one of the most powerful in the world; it was now in bad shape with an inflation rate over 100% annually, there is now a black market currency exchange (because the government refuses to admit how much trouble Argentina is in), and that a famous economist once said “there are four types of economies: the developed, the underdeveloped, Japan, and Argentina.” I have no idea what he meant but I think I might be starting to learn.

The surest sign a government is not telling the truth about its economy is when a black market currency exchange pops up. In 2002 the peso and the Canadian dollar were on par. Now the “official” exchange rate here is $1 Canadian = $160 pesos while the black market rate (here known as the blue rate) is $1 Canadian = $303 pesos.

I know a lot of purchases here use the blue rate by default but I wasn’t sure which would be which. I decided to make a small ATM withdrawal and check the rate. I found an ATM at the bus station but it wasn’t working “fuera de servicio”, so I walked to the cabin I’m staying at to check in and then headed out to try another ATM. The next two I found were both out of money, hmmmm something is afoot.

I decided ATMs might not work anyway and asked a couple people who they pointed me to Western Union, I know WU is a common way for foreigners to get cash in Argentina as they get the blue rate there so I walked to the only WU in town, they were also out of cash. Apparently they only give cash from 3pm daily and basically run out right away each day.

(NOTE: A couple days later I was walking past the same Western Union around 1pm and saw four American backpackers waiting for it to open, I warned them it won’t open until 3pm and won’t have much money to give anyway. I suggested the guy who changed my money. The head backpacker said thanks but no thanks, as they will get a better rate at the WU. Yes……… you will wait two more hours…. on the sidewalk…… to withdraw a maximum of $30 US in pesos…. at a rate of 400:1. When you could just walk two blocks right now and change as much money as you want at 393:1. Because apparently that extra 1.75% exchange rate is really worth it?! *eyeroll*)

I finally found a working ATM at a gas station and withdrew 1000 pesos as a test (about $6 Canadian). The machine worked and gave me a single 1000 peso bill. I checked my account and saw that this 1000 pesos had cost me about $16 Canadian, rather than the $6 it should have even at the terrible official exchange rate. So, yeah, ATMs are out of the question.

As I walked away from the ATM a guy standing in a doorway asked “cambio?” (change). I stepped into his porch and we agreed on a rate within about 3% of the current blue rate. I gave him $200 and he counted out a massive stack of bills, rolled them up and handed them to me secured with a rubber band. Very reminiscent of Uzbekistan where the best rate is the “taxi rate”, available only from cab drivers.

The blue rate is so cemented here now that as of December any purchases made in Argentina with a foreign credit card must use the blue rate rather than the official government rate. This was forced by VISA/Mastercard as the government’s refusal to face the situation was destroying the tourism industry here and credit card usage.

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