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ECONOMY | 30-06-2022 00:37

Argentina remains hooked on ‘dollar-dependence’

Argentines do their accounts in dollars, traumatised by recurrent economic crises and tormented by the inflation that is eating away at their pockets and is projected to exceed 60% this year.

To buy a property or car or to rent a house, sums have to be done in dollars. In Argentina, citizens remain traumatised by the country’s recurrent economic crises and tormented by an inflation (projected to top 60 percent this year) which gnaws away at their pockets.

"To live hanging on the dollar is a karma which we will always have. We Argentines are green," comments 56-year-old Marcela Leirón ironically, resigned to "dollar-dependence, the fault of the economic mess which no government could fix."

It requires concentration too. Following the re-introduction of the capital controls in 2019, other rates have co-existed with the official - 'blue', 'social', 'puré', 'contado con liqui,’ etc., each the product of popular ingenuity or sophisticated financial operations to gain access to hard currency in a country where it trickles down.

Early in the week the 'blue' dollar (as the greenback purchased on the black market is called) was already topping 230 pesos as against an official exchange rate of 130 pesos, amid expectations of devaluation, price mark-ups and in line with the payment of the midyear ‘aguinaldo’ bonuses of wage-earners who turn to the dollar as a safeguard against inflation.

"In Argentina, the dollar is always news," economist Andrés Wainer told AFP in an interview. 

"In bi-monetary societies like Argentina, where the dollar is a reference and a reserve asset value, people save in dollars and the demand is constant," he explained.

 

Everything in 'greenbacks'

Marcela has no idea of how much her house is worth in pesos. Like most Argentines, she only knows its price in dollars. The real-estate market has moved in greenbacks since the 1976-1983 dictatorship.

"While there is inflation, working in dollars is obvious. We do not have a strong currency nor an inflation under control as Chile or Israel have achieved," Alejandro Bennazar, president of the Cámara Inmobiliaria Argentina (“Argentine Real-Estate Chamber”), told AFP.

Inflation so far this year has accumulated 29.3 percent at an annual rate of 60.7 percent since May, 2021, one of the highest rates in the world.

The currency exchange culture has developed its own jargon. ‘Arbolitos,’ or little trees, are the hawkers buying or selling dollars on the pedestrian streets of downtown Buenos Aires. The ‘cueva,’ or cave, is the place where transactions are performed.

In the view of one arbolito, who asked to remain anonymous, his work "is a service to the community because people make more out of changing in cuevas than in the bank. It’s part of the normality of the country." 

Marcela buys "like an ant, a monthly US$20 to 50, whatever I can." Responding to the question of whether she would save in pesos, she answers with an emphatic "Never!" 

"Argentines save in dollars and when crisis comes, they sell. Confidence in the peso will never be recovered," affirms another arbolito with a decade’s experience in the business.

Currency controls permit citizens to make monthly purchases of up to US$200 at the official exchange rate but complex requirements plus surcharges make most people recur to informal markets.

Imports need authorisation from the Central Bank, which this week placed new conditions on incomings in a bid to limit the use of its scant reserves to essential goods.

Gross international reserves ended May at US$41.561 billion, starting this week at US$38.1 billion.

But net reserves (after discounting, for example, statutory reserve requirements) are below par, according to the analysts, and the scenario will be worse in the second half of the year.

"There will be less dollars because the hard currency from farm exports will dry up while energy imports are increasing," indicated Wainer.

 

A right?

The dollar is a highly sensitive issue in Argentina. In 2019, the return of exchange restrictions after more than three years of liberated exchange markets provoked social discontent and some people went out into the streets to protest.

"That dollar purchase is seen as a right which cannot be denied by any government is a new discussion," Mariana Luzzi, a sociologist, CONICET researcher and co-author of the book El dólar, historia de una moneda argentina (1930-2019) told AFP.

Her work looks at how the dollar has entered daily life, so much so that it is now "something relevant to workers, housewives or pensioners, who understand its exchange rate as a key to interpreting and evaluating what is going on."

"We Argentines know that if the dollar goes up, it announces difficulties, translating into price increases, but more profoundly it indicates to us that there is an important part of the economic situation which the government in power is not managing to control."

by Sonia Avalos, AFP

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