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TheHowandWhyofArgentina'sCurrencyBlack
Market

Argentina'slargestBlackMarkethasbeenaroundforoveradecadeandstilloffersonlyonecommoditymoney.The
markethasbecomesohugethatArgentiniansandforeignersnolongerheadtothebankfortransactions,buthitthe
streetsinstead.

ByGraceMcClureOctober,2013

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Thebuzzofchaoswhispersonthebackofyourneckthesightsandsoundsoverwhelmyoursenses.Thestreetsare
floodedwithpeople:thoseselling,thosegreetinganexchange,andthosesimplydrawntothehustleandbustle.Youare
onedge,refusingalleyecontactinanattempttorepellocalsorcerersandcounterfeithandbaghustlersfrom
approaching.

Yourbreathinghasbecomeshallow,butyoutrytoremainfocused.Afterall,youareheretodosomethingthatover
17,000peoplehave'liked'onFacebookYouhavecometotheBlackMarketinBuenosAirestoexchangemoney.

YouquicklyrealizethatthisBlackMarketiswithoutvoodooorpreservedinsects,andthatwhatisforsaleisnotatall
mysterious.Thehotcommodityismoney,andbothlocalsandtravellersswarmthestreetstomakeanillegalexchange.

OneLove:TheAmericanDollar
Insteadofatriptothebanktoexchangemoney,youheadtothe'cuevas'onFloridaSt.These'caves'areapartof
Argentina'severexpandingBlackMarketthathasonedrivingobsessiontheUSDollar.

Foroveradecade,ArgentinianshavehitthestreetsinordertogettheirhandsonthecovetedAmericancurrency.This
movementspawnedfromthegovernment'sdebtdefaultin2002whichcreateduncertaintyanddistrustinthestabilityof
theArgentinianpeso.

What'stheGoingRate?
Today,theinformalcurrencyexchangeintheBlackMarkethasbecomesohugethatthe'dlarblue'(bluedollar)
exchangerateisprintedinthedailyBuenosAiresnewspaperElCronista,andisupdatedliveonline.The'bluerate'isin
constantfluctuation,butinthelastyearithasconsistentlybeenaround3550%higherthanthecountry'sofficial
exchangerate.

Thecurrentbluerateis9.40ARSfor1.00USD,opposedtothemuchlowergovernmentregulated5.85ARSfor1.00
USD.

Ifyouhave100pesos,youcantradethisfor11USDontheBlackMarket,or17USDwiththeofficial
exchangerate

OntheBlackmarket,localsacceptamuchworseexchangerateinordertodiscardoftheirpesosoftentradingforhalf
ofwhatArgentina'sgovernmentindicatestheyareworth.Butwhywouldtheyswarmillegalchannelstotradepesosfor
wayabovetheofficialexchangerate?Becausetheycan'tmakeanexchangeanywhereelse.

WhyDoestheBlackMarketExist?

WiththeArgentineDebtCrisisin2002andthefearthatanotherdebtdefaultwilloccurunderCristinaKirchner's
presidency,thereishugedistrustamongstArgentiniansandtheirfinancialinstitutions.

SincegovernmentrestrictionshavemadeitnearlyimpossibletolegallyacquireUSdollars,Argentiniansturntothe
BlackMarkettoescapetheuncertaintyofthepeso.
FearofAnotherDebtCrisis

In2002,therewasarunonthebankswhereeveryonetriedtowithdrawtheirsavingsatthesametime.Thisexacerbated
thecountry'seconomicissues,causingthegovernmentandbankstoputrestrictionsonhowmuchresidentscould
withdraw.

Becauseofthis,localshavebeenwithdrawingsmallamounts,butconstantly.TheequivalentofUS$80billionhasbeen
withdrawnfromsavingsaccountsoverthelast5years.Intotal,aboutUS$160billionofundeclaredcashisestimatedto
befloatingaroundthecountry.

ALocalJoke:AllArgentinian'sandtheirGrandma'smattressesarestuffedwiththefacesofformerUS
presidents.

InflationWoes

Argentina'sinflationrateissaidtobearound25%(fromprivateanalysts).Thismeansthatabasketofgroceriesthatcost
$100ARSlastyear,willnowringinat$125ARSfortheexactsamegrocerylist.ComparethistotheUSinflationrate
of1.5%andyoucanunderstandhowblownoutitis.

Thishugeinflationrateresultsinpricesconstantlygoingupandthepurchasingpowerofpesosplummeting.Italso
makeslocalseagertotransferpesosintoamorestablecurrencythatisn'tinaperpetualstateofdevaluation.

ThosewithexpendableincomeheadtotheBlackMarkettoexchangetheirpesosforUSdollars.Thisistoensurethat
theirsavingsareinamorefixedcurrency,andaresecure.
Forinstance,inayear,savingsof$1,000USDwillstillbeworthrelativelythesameamount.Argentinian'sdonotfeel
thesameabouttheirownnationalcurrency.

MissionImpossible:LandinganAmericanDollar
ThegovernmentmakesitextraordinarilydifficultforresidentstolegallyobtainAmericandollars.Notonlyarethere
majorrestrictionsintheamountonecanobtainannually,butthefrustrationoftheprocessalonewouldturnanyoneinto
ahardenedbluedollarcriminal.

Inordertogettheprizedforeigncurrency,localsmustjumpthroughseveralhurdlestoprovetheirdedicationtothe
cause.

Forinstance,anyArgentinianwishingtotravelabroadmustprovidetheirtaxidentificationnumberanddeclarewhen,
whereandwhytheyaretravelling.Evenafterthis,andwithstandingexhaustivelineups,onecanstillbedenied
Americanmoney,orbegivenhardlyenoughtocoverabusfare.

ThistightgripontheAmericangreenbackispartiallyaresultofArgentina'snationalforeignreservesplummeting19%
since2011.Infact,theforeignreservesareata6yearlowandhavefallenatthefastestpaceinthelastdecade.

Accordingtothelatestfiguresat18October2013,Argentina'sCentralbankhaslostUS$9billionfrom
theirinternationalreservessincethebeginningoftheyear,whichisatarateofUS$31.1millioneachday.

TheTourist:SupplyingtheDemand
Withoutaconstantflowoftouristssupplementingtheexistingfloatwiththeirforeigncash,theentireunderground
marketwouldcollapse.Simply,theamountofforeigncurrencycirculatingontheBlackMarketwouldnotsustainthe
localdemand.

Asabyproductoftheexistingeconomicdisconnect,youcanessentiallydoublethenumberofpesosyoureceivewhen
exchangingontheBlackMarket.

BywithdrawingattheATMortradingcurrenciesattheofficialexchangerate,youarethrowingawayhalf
ofyourmoney.

Toillustrate,hittingupanATMandwithdrawingtheequivalentof$100USDwouldfetchyouapproximately585ARS.
Comparably,thissame$100ontheBlackMarketnearlydoublesyourpesosto1,000ARS.
What'sYourOpinion?

Thisundergroundmarketaidsinthecirculation,redistributionandhousingofasmuchcashastheentirenet
worthofIBMandFacebookcombined.

Whatdoesitallmean?Essentially,theopinionssurroundingArgentina'sCurrencyBlackMarketalterdrastically
dependingonwhichlensyouadopt.

1.Government
ExchangingmoneyillegallyisleadingtobillionsofundeclareddollarsatplayinArgentina.Alotofthesedollarsarein
thehandsofmoneylaunderers,andthosewhoengageinmoreriskyandillicitcriminalactivities.Inaddition,with
Argentinianswithdrawingbillionsfromtheirbankaccounts,therearefarfewerresourcesavailableforthegovernment
tobuildasustainable,trustworthyeconomy.Assuch,theArgentinianpesowouldbemuchmorestableifeveryone
wasn'ttryingtoconverttoanothercurrency.

2.Local

TradingpesosillegallyisoftentheonlywaythatArgentinianscangettheirhandsonamorestablecurrency.Inriding
thewaveofanunreliableeconomyandnationalcurrency,therighttotradeoutriskforgreatersecurityshouldbe
availabletoresidents.Also,withtherateofinflationconstantlydiminishingthevalueofthepeso,"freezing"assetswith
amorestablecurrencyisnecessary.

3.Tourist
Tradingindollarsatabetterratethanthe"officialexchange"intheBlackMarketmaybeamorerealisticrepresentation
ofwhattheArgentinianpesoisworth.Infact,Argentinahasrecentlybecomethefirstcountrytobecensuredbythe
InternationalMoneyFoundation(IMF)forinaccurateinflationstatistics.Withthegovernmentpublished"official"
inflationratebeingfartoolow,thefixedexchangeisnotapropermeasureofthepesosworth.

So,areyougoingwiththecavesortheATM?

FoodDollarsforThought
Argentinahasoneoftheworld'shighest"unofficial"inflationrateswhichperpetuallydevaluestheworthoftheir
currency.Thishighinflationratepairedwithpooreconomicdecisionmakinghasdestroyedallloyaltyandconfidence
towardthepeso.Untiltheunderlyingeconomicandpoliticalissuesareresolved,aparallelBlackMarketwillcontinueto
dominatethecountry'sholdonforeigncurrency.
PresidentCristinaKirchnerhasemployedseveralfailedattemptstoabolishArgentinian'shungerforthegreenback.The
mostdrasticofmeasuresbeganin2011whencompaniesandindividualswereprohibitedfrompurchasingdollarsfor
savingspurposes.Predictably,thishungerneverwavered,andonlyencouragedmoreillegalbankingonthestreets.

Nexttimeyou'reinBuenosAires,payattentiontothetaxisheadingdownFloridastreet.Inalllikelihood,thecabsare
filledwithclientsjustlikeyouandmeallheadingtoanappointmentattheInformalBankofArgentina.

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