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Why Does Argentina Have Two Exchange Rates?

If you plan to travel to Argentina in the near future, you are likely to need some of the local currency. But you may also have heard that many places accept US dollars. So how much, if any, should you take in dollars?

Although the official currency, the peso, is accepted everywhere you will probably find that most places will also gladly accept the dollar – although you might not get the best exchange rate if they are not used to dealing with foreign currency.

The peso has devalued substantially over the last ten years and many Argentinians now use the US dollar to save for the long term. That, coupled with restrictions on buying foreign currency, make it widely sought-after in the country.

After the economic crisis, the government put trabas (obstacles) to prevent people from buying USD freely. As it has became more and more difficult to buy them legally, opportunities opened up for a black market in currency trading (1:40).

Times in brackets show roughly when we mention each topic in our Spanish-language podcast.

To meet the many requirements (requisitos) for the purchase of dollars inside Argentina, you will usually need to provide evidence of a genuine reason for needing foreign currency (such as travel) as well as provide information about your income. There will also be limits (e.g. monthly/weekly) on how many dollars you can buy.

arbolito-de-dolares

Los Arbolitos

Los arbolitos‘ (literally “little trees”) is the term for people who sell dollars (illegally) on the streets. They will often be found in the same place, selling their ‘green leaves’ – the US dollar. One of the most popular spots for arbolitos to hang out was Florida, one of the main pedestrianised streets in the centre of Buenos Aires.

As with any currency traders, the price at which they buy is lower than the price they sell. However, due to the difficulty and restrictions in place to buy and sell dollars this price difference grew and grew. The relative convenience of buying them in the street, without having to go through the trabas or trámites to buy them officially increased the price further.

For Argentinians saving for the long term, the higher price of buying dollars is offset by inflation and the devaluation of the peso. It comes down to a choice between overpaying for dollars which hold their value, or pesos whose buying power will likely reduce over time (3:49).

Due to the instability of the local currency, some larger purchases, like houses may be bought in dollars (5:55). More recently, it seems house prices are being advertised in pesos, although the actual purchase may well still be completed in dollars. Showing the price in pesos at least gives the impression that businesses are using the local currency.

El Dólar Blue / El Dólar Paralelo

Following the crisis, the government accepted that there was a ‘citicación parrallel‘, and came up with the term ‘el dólar blue‘. I’m still not exactly sure why this term was chosen, but it may simply be to distinguish it from the standard green dollar. I have read some comments that suggest the term ‘blue’ is used in English to refer to illegal markets, but I haven’t heard it used that way before.

There is effectively an acknowledgement from the government that a dual price exists for the dollar and the price now appears in the mainstream press. Rather like people generally know the price of milk, the price of el dólar blue became un tema codidiano (8:10) – most people will know roughly what the price of the blue is, and likely have an opinion on whether it is likely to rise or fall in the short term.

What is the difference in the official vs. unofficial rates?

The difference between the official and blue price is not insignificant. At the time of writing the difference between the official and the unofficial rate was around five pesos. To find out the official rate, you can check any page, such as XE.com as it will be (more or less) the same anywhere in the world (8:54).

To find out the unofficial rates, some of the more popular sites are DolarBlueHoyDolarBlue.net and Precio Dolar Blue – or you can just Google “’el dolar blue en argentina” (8:54). The fact that major newspapers in Argentina report the rate is a sign of how widely accepted the unofficial rate has become (9:30).

In theory, there would be alternative markets for Euro, Pounds Sterling, Australian dollars etc.  Indeed, it is possible to buy currencies at prices distinct from the official rate, but difference not as pronounced (10:06).

One of the main newspapers in Argentina, La Nacion recently listed the prices that of the official rate at roughly nine pesos to the dollar, with the dólar blue at over twelve pesos. This difference which adds up if you are changing $1000s at a time or trying to save for retirement (10:35).

Before you get ideas of taking large quantities of dollars over to sell at an inflated rate to subsidise your trip, it is unlikely to be a good idea. Obviously we do not advocate anything illegal, and apart from that it is potentially dangerous and generally not recommended (11:00). There are also strict limits on how much you currency you can take into, and out of, the country.

Also, although there is a broadly accepted price of the blue, which is semi-fixed, as with anything it changes and can be negotiated. As a tourist you’re unlikely to negotiate the best rates, and would likely end up getting closer to the official rate (11:50). Be comforted by the fact that you’ll be able to spend dollars if you run out of pesos.

We are not suggesting any money-making schemes, simply letting you know what goes on in the country as you might wonder what this ‘blue dollar’ is that everyone is talking about and how it came about (12:45). You might also wonder why there are so many opinions on where to exchange your money!

So when are Argentinians allowed to buy dollars?

By way of example, trying to take out money for a trip overseas, the ‘trámite’ (literally ‘procedure’ – maybe better translated as ‘chore’, ‘red-tape’ or ‘paperwork’) involved taking copies of ID, trips to the bank, making copies of payslips both as proof length of time in a job, and to ensure a certain level of income, waiting a week to get permission to buy dollars, providing evidence that the specific reason for requiring dollars (travelling outside the country) was genuine through flight tickets (13:23).

Based on how much you earn, the officials will tell you how many dollars you can buy. After waiting a week the permission was granted, but only for a specific time period (one week before the date of departure), get your permission. A few months later, a request to buy dollars for overseas travel was denied (15:53). Which explains why there is a parallel dollar! Given the difficulties and long process involved in buying dollars, it is no surprise that people are prepared to pay over the odds for something. The dollar is also seen as more stable, more likely to hold its value over the long term, at least enough that it will be what it was when saved.

corralito-argentino

El Corralito

During the economic crisis ~1998-2001 to try to prevent a run on the banks, the government introduced a series of financial controls and banned withdrawals from dollar-accounts. At the same time, the peso devalued going from about 1 to 4 pesos to the dollar.

The restrictions on accounts was called ‘el corralito‘ (the little [financial] corral). In many ways it seems like a more extreme version of what happened in the US and Europe during the global financial crisis. As with any economic crisis, the problems usually aren’t short-lived, countries can suffer for long periods of time afterwards and it usually requires a change in law (and governments!) for the changes to come into effect.

A phrase used at the time, and one which has since passed into the national consciousness was, “los que ahorran en dolares, van a recibir dolares; los que ahorran en pesos, van a recibir pesos” [those that save dollars will get dollars; those that save pesos will get pesos]. We think it was the Argentine finance minister at the time but haven’t been able to find a source for that information yet. If anyone can help out, please let us know!

In any case, ultimately it was a lie, the majority of the population received devalued pesos.

When I was last in Argentina, I was surprised at how many people did not trust the banks and took their salaries out, in full, on payday (17:04). Maybe their lack of trust in banks is a bit more understandable now!

Listen to the full episode below (the podcast, as ever, is exclusively in Spanish)…

 

Disclaimer:

Obviously we are not advocating illegal money-changing, neither are we giving any financial advice! Our focus this week was on the two exchange rates used in Argentina – we strayed into discussing the economic crisis as necessary background to explain the reasons they came about. The economic crisis around 2001 is a huge topic, and one which we will no doubt return to in future. We are not economists, so apologies if any of the terminology has been misused or misunderstood.

 

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How does the situation seem to you? Is it not all that different to the global financial crisis? Can you explain the crisis better than we can?! Let us know in the comments below.

 

josh

josh

Are you ready to take your Spanish to the next level? Do you want to learn all about Argentina? This site provides Spanish listening comprehension practice on a wide range of topics related to Argentina.

8 thoughts on “Why Does Argentina Have Two Exchange Rates?

  1. Something messed up with the iTunes feed, so apologies if your version was corrupted around the 13-minute mark. It has been fixed on the blog and YouTube, but can’t work out how to re-issue through iTunes. We have fired the person responsible (me).

  2. ¡Muchas gracias! Tengo una pregunta… cuando estudié en españa (hace ~14 años) usé mi tarjeta de banco en los ATM(?) para obtener la moneda española. ¿Es posible hacer lo mismo en Argentina?

      1. Ese blog era interesante. Voy a viajar con un grupo (soy la profesora “extra” para un curso de una universidad. No necesito enseñar, pero porque puedo hablar mas o menos, puedo ayudar con las cosas pequeños.) y la otra profesora va a decirme que necesitamos hacer para dinero, pero es muy interesante las diferencias entres los paises todavia hoy en dia sobre el dinero!

  3. Que bien que podés viajar a Argentina aunque puede ser difícil controlar todos esos chicos! No lleverías más plata a la ves que piensas vas a necesitar por las dudas.

  4. Hola, I’m having a hard time understanding Argentina Spanish. This podcasts help! But I’m wondering if you may provide the transcript so I can practice the listening better. Thank you.

    1. Hola – nos allegra que estas disfrutando los podcasts. So far we have only done the first episode – it took a lot longer than we thought! Send me an email (on the ‘about’ page) and I will send it to you 🙂

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