A Crash Course on Argentina’s Loco Exchange Rate Situation

In order to understand why Bitcoin might be of particular interest to Argentine citizens, it is first necessary to gain a general understanding of the current economic climate here. Argentina was once a world economic powerhouse, but over the past century, the nation has experienced numerous crises due to a variety of factors including political instability, foreign involvement, and globalization. Following the major crisis of 2001, major restrictions were placed on imports in an attempt to bolster the domestic economy and it has been difficult for Argentines to purchase foreign goods ever since. A decade later, in October of 2011, current President Kirschner took this a step further by placing a limit on the amount of US dollars Argentines could take out of their bank accounts. This move, which pegged the peso to the US dollar at an artificial rate of 8.5/1 has created an enormous black market for US dollars in the country.

Argentine citizens have historically always preferred to save in dollars in order to counter the rampant inflation inflicted upon the peso. For those of you without a background in economics (and because you never have to worry about this in the US!), this basically means that Argentines are always concerned about the value of their paycheck/savings account decreasing in value over time. Our research deals with digital currency adoption as a mechanism to circumvent this convoluted system of acquiring dollars. But more on that later…

As a traveler from the US or Europe in Argentina, you are at a huge advantage if you bring dollars or euros with you. That’s because Argentines want dollars, and by astutely navigating the informal market it is possible to dramatically lower your costs while in the country. As of today, January 9, the official rate–what you get from an ATM or what you get when you make a credit card charge–is 8.5 pesos/1 USD. The medium rate–what you get from a seemingly more legitimate “officina de cambio”–is around 12/1, and the Blue Rate–which you get from the arbolitos on the street of if you know about a “cueva”–is about 13.5/1.

This is a huge difference! Buenos Aires goes from being about as expensive as a mid-level European city (think Madrid or Rome) at the official exchange rate to probably cheaper than Lima, Peru or San Jose, Costa Rica at the Blue Rate.

For Example…

A beer or a cup of coffee in the city is typically about 30 pesos, which at the official rate costs $3.53 usd, but at the Blue rate is only $2.22 usd.

Now take something more expensive, like dinner for two with wine at a nice “Parilla” (steakhouse). It might run you about $450 pesos in our neighborhood. That’s $53 usd at the official rate but only $33 usd at the Blue Rate. You just saved yourself $20!

Into the Lair…

Upon arrival last week, Kate and I obviously needed some pesos to buy food and whatnot, and didn’t want to use the ATMs, so we exchanged at an “oficina”. One day we were offered 12 pesos per dollar and another we were offered 12.2. A few days into our stay we befriended some people who knew of a trusted “cueva” nearby, where they had gotten a 13.2 rate. We decided to check it out.

It was located on a quiet residential street in Villa Crespo, a neighborhood directly adjacent to trendy Palermo Soho, where we’re staying. We had the address written down, and when we got close we noticed a security guard meandering around on the sidewalk. Before we even reached the guard, a man sitting on a bucket in a doorway greeted us and ushered us inside. He was very friendly and it was clear that he knew what we were looking for. We entered what seemed like a dilapidated ground-floor office, and were told to go down a hallway to a room in the back. There was a little sign prohibiting cell phone use, so we were unable to snap any pictures. The back room was dimly lit by just two candles; two men sat barely illuminated behind a heavily-tinted old-school bank teller window. They invited us forward and offered us a rate of 13.5 pesos per dollar. We gladly accepted, and received our pesos in rubber-banded stacks of 1,000. Before we could count to make sure the amount was correct, we were ushered back outside.

The experience as a whole was not scary, but it was certainly a bit intimidating. However, back out on the street and around the corner we counted our pesos and the number was exactly correct. As unusual or sketchy as this experience seems, it is merely a facet of day-to-day life for many citizens here.

Argentina’s Underground Economy: Terms to Know :

Arbolito: Translates to “little trees” but refers to men and women on the street who are in the currency exchange business.

Calle Florida: Major pedestrian thoroughfare in the center of Buenos Aires where Arbolitos are known to do their business.

Cambio: Means “exchange”. As a fair-skinned, backpack-wearing person in Buenos Aires, you get constant offers to “cambio dinero”.

Cuevas: Translates to “lairs” or “caves” but in reality they are more like informal exchange houses.

Dolar Blue: They don’t use the phrase “black market” or “mercado negro” to refer to the underground exchange, instead it is called the “blue” rate.

Oficina de Cambio: These exchange offices seem to operate on the border between the legal and informal exchange. They are housed in official storefronts, and offer an exchange rate in between that of the Blue rate and the official rate.

Precio/Tasa: Both mean “rate”. When you go to exchange money, you ask them “Que precio tiene aca hoy?” or “What’s the rate (of exchange) here today?”

Uruguay: It is perfectly legal to take US dollars out of ATM machines in Uruguay, which is an hour boat ride away from Buenos Aires. Many expats and others with foreign bank accounts take the boat to Uruguay, take out US dollars there, and then return to Buenos Aires to exchange at the Blue Rate