Economic crisis in Argentina gives rise to “blue market” currency exchange houses
Argentina has been sliding into another economic crisis, with its currency rapidly losing value since the beginning of the year. To protect their earnings and savings, many Argentines have turned to an unofficial – and illegal – currency market. Zoe Sullivan has more from Buenos Aires.
A new economic crisis developing in Argentina is making many locals and tourists turn to underground, so-called “blue market” currency exchange houses. The government regulates the official exchange rate in an attempt to stabilize the economy, but many see regulation as an attempt to prevent a flight to other currencies. The informal market rates offer as much as 50-60% more than the official bank rate. In January, this difference was even more pronounced. And while blue market currency trading is technically illegal, it’s so widespread that centrally-located hotels offer their guests the option of paying with the informal rate.
Laura, who preferred not to give her last name, works for such a hotel. “There is no obligation to pay in pesos,” says Laura. “The person has the option of paying in pesos or in dollars. When they pay in dollars, there is no conversion into pesos. When they pay with a credit card, the official rate is used because the bank is handling the transaction.”
Outlets such as The Guardian and The Economist report prices in Argentina jumped as much as 25% in January. This rapid inflation fuels the unofficial currency market as Argentines seek refuge in stable currencies, such as dollars, in order to maintain their savings. The economic collapse of 2001 is still a vivid memory here.
Luis runs an unofficial currency exchange in Buenos Aires and has been working in the business for over 40 years. Since blue market deals are technically illegal, he requested to be identified with his first name only. Luis told FSRN that Argentina´s population has some of the world’s highest rates for converting their savings into U.S. dollars. Luis says those working on the books, or “in white,” have an advantage. “The government allowed people who had their salaries to invest in dollars, up to 20% of their salaries,” Luis says. “In about 10 days they did half a million transactions. So, about half a million persons who have their salaries in white, they went and they requested to buy dollars. And the limit for that is probably $500 or $600 dollars. So, that means there is a really huge demand.”
The peso’s plunge has cost “la Presidenta,” Cristina Kirchner, dearly in terms of her popularity. It also indicates that one of Latin America’s major economies – and a significant trading partner for regional giant, Brazil – is on the rocks.