All dollars are equal, but some dollars are more equal than others. At least that’s certainly the case in Argentina, where a single $100 note buys you more pesos than two $50 notes or — worse than that — 20 crumpled $5 notes.
Argentine friends had been unequivocal as I headed their way: live by the day and live by the dollar. Leave your credit card in your wallet, don’t go near an ATM, and come armed with US dollars in cash that you can change into pesos on the ground. Not just any dollars, crisp $100 dollar bills. They weren’t exaggerating.
Holding the local currency in an economy experiencing rapid inflation is rather like trying to descend an ascending escalator, or as Agustín Arias, owner of one of the country’s oldest estancias, El Bordo de las Lanzas near Salta in the north, puts it: “the prices go up in the lift and the salaries go up the stairs”.
For Argentines, the double-digit inflation afflicting Britain would look like a rounding error. Inflation, which reached 3,000 per cent in 1989, last year hit a three-decade high of 95 per cent. I heard of a man who papered his walls with 10-peso bills because it was cheaper than buying wallpaper. Rubbing salt in the wounds, President Alberto Fernández claimed in January that “a large part” of the price rise “is self-constructed, it’s in people’s heads”. Perhaps something of a stretch of the imagination when prices are effectively increasing by an average of around four to six per cent a month.
Inflation is so ingrained in daily life that Argentines talk about it in the same way the English talk about the weather. To protect themselves from declining purchasing power, Argentines buy dollars. In 2020, the Banco Central de la República Argentina (BCRA) estimated that Argentines held $170bn in cash dollars in the country, or 10 per cent of all the dollars in circulation in the world and a fifth of those outside the US.
Hoarding dollars — the proverbial hiding cash under the mattress — is a national pastime that’s etched into the mind from a very young age. I am riding with Arias through the tobacco fields near El Bordo one evening, with the estancia’s gaucho José Maria Gallardo, when Arias tells me how his seven-year-old son recently received a 1,000-peso note (less than $3) from the tooth fairy. The child immediately announced that he needed to convert the pesos into dollars.
Of course, from a traveller’s perspective, rapid inflation in the local currency works in your favour because it means that your dollars will go further and further as the trip progresses. But to take advantage of that, it means exchanging $100 notes as you need them. And this is not entirely straightforward.
Unlike most other countries, Argentina has an artificially pegged exchange rate, which means that it is set by government mandate rather than market demand. Capital controls have been lifted and reintroduced several times over the past few decades. In 2019 they restricted Argentines to buying $200 a month at the official rate, including card purchases in foreign currency, and make it very difficult to move money out of the country. (It’s no wonder that many of them see cryptocurrencies as a safer bet than their own currency.)
The black currency market — traded out of illegal exchanges or cuevas and rather confusingly called the dólar blue — is part of a large underground economy. Right now the blue rate is so strong that if you avoid using the official rate you can double your money. To try to grab a slice of the billions of dollars of tourist revenues that are lost each year to the informal economy, late last year Argentina’s central bank launched a preferential rate for foreign tourists. This means that payments made on foreign credit cards use the ‘MEP’ (“Electronic Payment Market”) dollar exchange rate, which is slightly worse than the blue rate.
While nominally illegal, the blue dollar is so ubiquitous that where you might get the best rate is discussed as casually as comparing current account providers or those rates offered by different app-based fintechs such as Monzo and Revolut.
Wandering down Calle Florida, a narrow pedestrian street that is the black market’s centre in Buenos Aires, currency dealers call out “cambio, cambio”, competing for business. In the city’s heyday in the early 20th century, the street was home to the only overseas branch of Harrods department store. It closed for good some 25 years ago but the signs on the premises still remain. After negotiating the rate, a man is ushered into a small office just off the street to change his dollars. Only metres away, a pair of policemen stand smoking and talking, seemingly oblivious.
Exchange bureaus and Western Union branches are two a penny in Buenos Aires. But I soon learnt that it’s wrong to assume that just because you’ve found a Western Union — or indeed finally made it to the front of the queue — your travails are over. On several occasions, the kiosk had run out of pesos. (When the country’s largest 1,000-peso note is worth under $3, and people are accustomed to carrying around suitcases of cash for big ticket purchases, you can see how this happens.)
Another time I was turned away from a Western Union because I was told it was cash withdrawal only, no currency exchange. After overhearing my predicament, a retired man in the queue came to my rescue, pulling out a wad of pesos and offering to exchange my $100 note at the blue rate.
Worse was to come. In El Calafate, a city in southern Patagonia, I queued for over two hours at a Western Union one morning. The line was even longer than that of Don Julio — one of the best parrillas (grillhouses) in Buenos Aires. Only unlike Don Julio, the wait wasn’t softened by waiters handing out warm empanadas and glasses of sparkling wine.
Finally reaching the front of the queue, I am told to my exasperation that they won’t change dollars. I WhatsApp my friend Harry Hastings, who runs a travel company. He directs me to a restaurant two minutes walk away. I ask a waiter for the cambio and he gestures upstairs. There I find a woman sitting behind a table in a windowless room not much bigger than a broom cupboard. She has a cash counting machine, a calculator and bundles of 1,000-peso notes on the table in front of her, stacked up in rows like Jenga pieces. I experienced variations on this theme all over the country and, particularly in southern Patagonia where there were fewer options to change dollars, sometimes it felt like the exchange rate entirely depended on who you asked and what day it was.
As if the dual currency exchange is not enough to contend with, Argentina has around 15 different exchange rates, including a “soy dollar” for soy exports, a “Qatar dollar” for Argentine tourists travelling to the World Cup last year, and even the “Coldplay dollar”, a special exchange rate for paying foreign entertainers that made a name for itself when the band had a string of sellout concerts last year.
I’m climbing a hill looking down on the electric blue San Martín Lake in Patagonia with Maria Davila, who helps run an estancia called La Maipú on the shore below. Condors glide above us as she tells me about a satirical blog post in October in which a young economist compared each zodiac sign with the different dollar variants that went viral. Gemini was paired to the dólar blue: “its character is double and quite contradictory due to its complexity. On the one hand, he is able to easily and quickly adapt to everything, but on the other, he can be hypocritical.”
By the end of my month-long trip, the novelty of black-market currency trading and trying to stay one step ahead of rampant inflation was starting to wear off. Simon Kuznets, who won the Nobel Prize for economics in 1971 for his work on growth, famously said that there are four types of countries in the world — developed, undeveloped, Japan and Argentina. As I began the long flight home, I was left pondering the conundrum of the country’s ability to endlessly squander extraordinary opportunities.
Back in London, I call up a man who knows a thing or two about living with inflation. Martín Lousteau is an Argentine economist and former minister of economy who studied economics during hyperinflation in 1989. He’s from the political opposition and is now a senator for Buenos Aires. “We’re used to it — but it takes up a lot of time, money and mental energy,” he says. You’re telling me.
Harriet Agnew is the FT’s asset management editor
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