Argentina's Economy is Tanking

Argentina’s economy is in trouble. Thanks to President Cristina Kirchner’s protectionist policies, trade with other countries is restricted, inflation is high, and there is a shortage of dollars both in the government’s foreign-currency reserves and on the street. That’s led to the government restricting people from trading Argentine pesos for dollars on the open market in what’s known as a “dollar clamp.” But to hear President Kirchner tell it, everything is hunky-dory.

“There is no dollar clamp, I’ll tell you,” the president said in a rare interview on state-run TV in late September. “I just came back from New York City — it was crowded with really cool Argentine tourists waving hi. There is no dollar clamp.”

At best the president is using tourists in New York as an economic barometer for her country; at worst it’s a bald-faced lie and an insult to Argentines’ intelligence. The fact is that residents who want to swap pesos for more trustworthy dollars have to go through an enormous amount of red tape and prove they are leaving the country. “If you travel to bordering countries, they’ll sell you local money; if you go to America, you get dollars,” said Marco Mora, a government worker who recently went through the process. “But no matter your needs, they give useless amounts.” He ended up getting $85 for a 15-day trip to New York City, much less than he wanted.

Even worse, the government won’t give Argentines cash; it deposits money directly into their bank accounts. That’s convenient for the government, which collects an extra 20 percent in taxes when its citizens use their credit or debit cards abroad.

To get around these restrictions, a technically illegal but widespread black market known as thedólar blue (“blue dollar”) has emerged, where pesos can be traded for US currency. If you walk through Buenos Aires’s central business district you’ll find shady characters openly chanting, “Cambio, cambio”—“Exchange, exchange”—amid policemen and tax inspectors.

“They know what’s going on,” according to Marcelo, one of the money changers, but they also know they’re powerless to stop all the illegal trading. The blue dollar is so out in the open that the exchange rate is published in newspapers and by a Twitter account (@DolarBlue) with more than 31,000 followers. At the time of this writing, the unofficial rate was 9.80 pesos per dollar and climbing, which is several pesos higher than the official government figure.

If you don’t want to be cheated, you should know this constantly shifting number in advance. “Don’t expect good rates if you don’t call ahead,” Marcelo told me, before taking me to the 14th floor of a commercial building where there was a currency exchange operating behind bulletproof glass. It was a bit shady, but much preferable to dealing with the government.