Tuesday, November 6, 2012

Episode seven: The economy and the Dollar Blue

In Argentina, you can obviously buy as many pesos as you wish - it is the same in any country in the world. However, within the last year, they have totally banned the selling of their currency. For example, I could walk into a bank and change 20 pounds/dollars into pesos, but i could not change the pesos back into pounds*.

What does this mean? Well, there is a large black market which has only grown since this new law** - you could walk down almost any street in the centre of town hear at least 2 or 3 people per street mutter 'cambio, cambio' (exchange) in your direction. Whilst officially the dollar is 'sold' at 4.7 pesos per dollar (it used to be 1-1 less than 10 years ago), the only place you can actually get hold of any foreign currency is on the street, at about a 40% mark up - so your looking at 6-1 for dollars and about 10-1 for pounds. This is the dollar 'blue', and i guess the libra (pound) 'blue' aswell

Why would anyone bother? technically, if you needed dollars, you can apply to the government for what i can only summarise as a 'permission to leave for holiday', along with the exact amount of currency you will need for your trip, and they will allow you to buy it. G-d knows what happens if you go over budget...
Anyway, this is a long process - and it defeats the point of holding the dollar. At the moment, inflation in america is at around 2% - but here it is widely accepted as around 25% (and even official figures show it at 13%). Thus, if you hold dollars and not pesos, you are protecting yourself from a loss of currency value and the act itself is like a wage increase - when you need to buy something, you change the dollars back to pesos and by that time the dollar blue rate will have risen. And yes, the people who i've asked so far in the office changed most of their savings into dollars BEFORE the law came into effect, and im sure anyone with access to an account that holds dollars would have done the same.

I can only conclude that this is a contributing factor towards their high inflation - many people sold their pesos in a short period of time, leading to a mass loss of confidence in the currency and therefore a loss of value.

This leads on to the other thing i've noticed - that in most major stores, you get between a 10 and 20% discount for using a specific bank card (e.g. standander, hsbc etc). Imagine if they had this in England!! The only reason I can deduce for these types of discounts (at the end of the day, the bank probably end up picking up the price difference) related back to what i said above - if the peso doesnt really have value and people don't want to hold it, then people generally wont keep much money in the bank (they might, for example, have a small account for groceries etc but keep their savings either abroad in dollars or in dollar bills) - therefore the banks have to resort to actually offering discounts to make people keep their money with them. At the end of the day, it all comes down to economics 101 - cash is king.


episode 8: jewish life (and antisemitism)

*what does this mean for me? well, i cant change my money, so leaves me with a massive disposable income!

**I've been reliably informed that its not actually a law, its a resolution. This basically means it was passed autocratically, and therefore not even discussed in congress!

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