Argentina adds another exchange rate - for tourists only

Argentina adds another exchange rate – for tourists only

BUENOS AIRES, Argentina (AP) — In recent years there has often come a time when a visitor to Argentina suddenly realizes they could have gotten a lot more for their money if they had brought cash to buy pesos on the unofficial market.

A dollar would sometimes buy twice as many pesos in informal cash exchanges as the amount of pesos it would get in purchases made using a credit or debit card covered by the rate of official change.

“You can almost hear the blood pouring out of their voices when they realize that,” said Jed Rothenberg, owner of a travel agency specializing in trips to Argentina.

This should, at least in theory, be a thing of the past from Friday. The government has introduced new regulations allowing visitors using credit and debit cards to get more pesos than the official rate.

On Friday, one dollar was officially worth 157 Argentine pesos. But on the unofficial market, commonly known as the “blue dollar”, it could be worth up to 285 pesos. And in the system that will now be used by credit card operators, it was 292.

Informal forex traders have become more pervasive after strict capital controls were put in place in 2019 in an effort to protect the local currency from sharp devaluation amid high inflation in the country.

The government hopes the new rule for credit and debit cards will discourage all-cash transactions which make cash-laden tourists more vulnerable to thieves – and also often deprive the government of sales tax which is frequently ignored if there is no electronic trail.

Rothenberg has sought for years to explain Argentina’s varying exchange rates and the difficulties tourists face in using credit and debit cards. He didn’t always succeed.

“The vast majority of people are just confused: ‘You mean there’s more than one exchange rate and one of them can be a double or even a three-digit difference?'” said Rothenberg.

The new rule will do little to reduce the confusing complexities. This adds yet another exchange rate to the more than 10 that already exist in Argentina – a system that makes it impossible to simply tell what a peso is worth.

The government also imposes different taxes on the conversion of foreign currencies depending on their use, leading to rates that have household names like the “Qatar dollar” for travelers (a reference to the World Cup), the ” Netflix dollar” for streaming. services and the “Coldplay dollar” to book foreign artists to play in the country.

The reason no one can really say how much a peso is worth is because “it’s worth something different to each person,” said Martín Kalos, an economist and director of Epyca Consultores, a local consultancy.

“The government has segmented the market. There is no single value, there are several prices depending on who you are or what operation you want to do,” he said.

The government’s goal is to have a stronger peso to pay for the country’s imports in hopes of preventing the price hike from getting worse. The economy recorded an annual inflation rate of 83% in September.

Fernández’s administration is “implementing palliative measures, or corrective measures, because it has an election in a year” and any effort to correct these distortions would likely cause economic hardship that would be costly at the polls, Kalos said.

Argentina has been through so many financial crises in recent decades that its citizens are wary of their currency, so those who earn enough to save usually do so in dollars or euros.

Even economically savvy Argentinians are often confused.

Anyone who has not received state subsidies or who operates in certain financial markets can buy up to $200 per month but must add an additional tax of 65% to the official exchange rate.

Argentines who pay for their purchases in foreign currencies with their credit cards pay a 75% surplus over the official rate. But that’s as long as they spend less than $300. If they spend more than that per month, the surplus increases to 100%.

Argentinians can also buy dollars in the financial markets through transactions via bonds or stocks, but pay a price in pesos similar to that of the informal market. This is the system made available to credit card processing companies on Friday.

Experts said they need to see how the new system for visitors is implemented before knowing if it will be successful.

But if implemented well, Rothenberg said the change could be a boon for tourists.

“They just use their credit card, they don’t care about the details,” he said. “If they are really successful, Argentina could be one of the top tourist destinations over the next two years, especially given the current cost from the United States and Europe.”

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