In a move aimed at raking in tourism dollars, tamping down the informal exchange market and boosting Central Bank reserves, the government has announced it will offer visiting travellers a more lucrative exchange rate on card purchases.
Under the new rules, which kicked in yesterday, foreign tourists who do not reside in Argentina and use non-Argentine issued credit and debit cards will be able to access an exchange rate similar to the ‘Dólar MEP’ (Mercado Electrónico de Pagos), which midweek stood at around 292 pesos per dollar – much higher than the official rate of 158 pesos per dollar currently applied to purchases made in Argentina by payment methods issued overseas.
Effectively, the measure introduces an exchange rate 90 percent superior to the official one applying to all tourist expenses in the country, including excursions, meals and tourist packages.
The Central Bank published the measure in Thursday’s edition of the Official Gazette and it took effect Friday, said officials, who said it would provide more ease and safety to tourists coming to Argentina.
According to official calculations, of the roughly US$200 million to US$250 million entering the country monthly via tourism, only US$30 million comes through the formal sector. With this new measure tourists can use their credit or debit cards at a cost similar to the MEP exchange rate, or what they were transacting previously with the illegal and informal “Dólar Blue” rate.
Battling inflation heading toward 100 percent, President Alberto Fernández’s government has struggled to convince travellers to put money into the country’s complex financial system. Tourists have long preferred cash in Argentina, but the trend has worsened in recent years because of a gap between the official rate and an alphabet soup of different, parallel rates.
Government officials were eager to stress the supposed simplicity of the operation for tourists. Visiting travellers pay in pesos with their cards and the consumption reaches them on their credit card statement in dollars converted at the MEP exchange rate. instead of the official.
For example, if a tourist pays 10,000 pesos for a dinner converted at the official exchange rate of 155 pesos, they will be billed for US$64.30. With this new measure they will still pay 10,000 pesos for the dinner but a consumption of US$34.24 (at a theoretical MEP exchange rate of 292 pesos) will appear in their credit card statement.
The credit card administrators will receive the dollars with five days to cash them in (as has been the case until now) but instead of using the MULC (Mercado Único y Libre de Cambios) official exchange rate, they will have access to the MEP exchange rate via financial markets.
The Economy Ministry is expecting a series of knock-on benefits from these transactions. Making the sector more formal and the possibility of the state having greater control over invoicing; a positive fiscal impact from IVA value-added tax revenues and the taxes to be paid from whitewashing transactions previously made in cash and also a positive effect in lowering the exchange rate by increasing the supply of dollars at the MEP exchange rate, which in turn exerts downward pressure on the “blue dollar.”
Last but the opposite of least, this move aspires to accumulate US$1 billion and US$1.1 billion dollars of reserves in the final two months of the year.
Sources in the Tourism & Sports Ministry told reporters that this measure would encourage visitors to travel to Argentina and assist the post-pandemic recovery. Even if the inflows from neighbouring countries and North America are already back to the levels of 2019, the European market has yet to recover.
The Central Bank also indicated that it will be obligatory to cash in dollars within five days with strict controls, criss-crossing data with Improtur, which will be responsible for controlling accordance with price agreements signed in the last edition of the Previaje tourist assistance programme. If non-compliance is verified, the CUITS of the agencies will be blocked.
On the side of consumer controls, the data will be cross-checked with the Immigration authorities to verify that cardholders are really non-residents and not Argentines who have just taken out a credit card in Uruguay.
Gustavo Hani, president of the Argentine Chamber of Tourism, hailed the news. "The measure was much awaited. Domestic tourism had been favoured by Previaje but incoming tourism has been lagging in its post-pandemic recovery and this will be a good booster,” he said. “It helps foreign tourists to encourage them to use their credit or debit cards; it makes things safer and more predictable for them.”
This will be the government’s third bid to formalise and tap the dollars of incoming tourism after two previous failed attempts. After the pandemic banks were instructed to open bi-monetary accounts with debit cards for tourists but they were unsuccessful. Then banks and bureaux de change were authorised to sell dollars to non-residents at an exchange rate similar to MEP but only Banco Nación adhered to the measure.
What will be the procedure of the new norm?
The tourists spend with their credit cards and the card converts that expenditure at the exchange rate fixed for foreign tourists. The tourists pay their cards in dollars and the credit card companies sell those dollars to Argentina via the financial markets. The shops and services are then paid in pesos.
What is the main objective of this norm?
The central idea of this norm is for non-resident tourists visiting the country to use the MEP for greater safety and comfort. Argentina has been developing a national system of digital payment.
How is the exchange calculated?
The exchange rate used will be the MEP dollar with the most liquid bonds, as used until now by Banco Nación. The credit card administrations may collect a commission for this transaction.
Is this for all tourists from any country?
Yes, for anybody with a credit card from abroad and not resident in Argentina.
How do you identify that the credit card belongs to a foreigner?
The same way you do already with the chips and routing of the credit cards indicating from what bank and in which country they were issued.
What happens to Argentines with cards issued abroad?
If you reside abroad and pay with foreign cards, you will have the same benefits.
What happens to Argentines with double nationality?
If they reside abroad and pay with foreign cards, they will have the same benefits.
Is that just for credit cards or also debit?
For credit, debit and also prepaid.