To understand the currency crisis rocking the Argentine economy and threatening to sink the government of President Javier Milei, just cross over the Andes mountains and descend into the Chilean capital of Santiago.
There, you’ll see scenes like the one Carolyn Pérez witnessed the other day outside a Courtyard by Marriott hotel.
There were these two Argentine couples, recalls Pérez, a security guard at the hotel, and they were loading all these bulky items they had just purchased into their car to drive back into Argentina. First, they wedged in a TV; then another TV; then a full-sized refrigerator; and then they squeezed their bodies into the car, one by one, and drove off as v looked on, dumbstruck.
“It was shocking,” she says.
And, for the Milei government, deeply problematic. For each month, there are hundreds of thousands of Argentines who, just like those two couples, are booking shopping sprees abroad that are depleting the hard-currency reserves Milei needs to defend the peso as it comes under attack. They’re travelling to Rio de Janeiro and to Miami and the Uruguayan beach town Punta del Este but, when it comes to pure shopping trips, mostly here to Santiago.
Along one popular border crossing in the mountains, the number of Argentine cars that have entered Chile this year is up 50 percent from a year ago and more than 150 percent from 2023. More Argentines have travelled to Chile this year than have people from every other country combined. Collectively, their purchases with Argentine bank cards have soared 438 percent in Chile this year, according to the consumer-segment data tracked by payments processor Transbank.
In fashionable shopping malls, like Parque Arauco and Costanera Centre, the distinct sound of Argentine Spanish, with all its Italian inflections, rings out day and night, and in the parking lots, the blue-and-white “República Argentina” license plates are everywhere. They’re there to load up on Jordan sneakers and Zara jeans and Lenovo laptops and anything else they can squeeze into a suitcase.
The frenzy has been triggered by Milei’s own policies. Desperate to quickly tame runaway inflation, he has insisted on keeping the peso largely stable against the dollar – a move that both holds down prices of imports and sends a broader signal of stability to a country ravaged by decades of economic chaos.
But in the process, the peso has become so strong, once inflation is factored in, that it’s making it incredibly cheap for middle- and upper-class Argentines to binge on those imported goods. And because Chile has such lower tariffs than Argentina – almost 30 percentage points less, for instance, on clothes – thousands of people are making the trek over the border every day to make those purchases. It’s turned into such big business for stores in Santiago that some of them have exempted Argentines from a rule requiring customers enter a Chilean ID number when making on-line purchases.
These shopping trips “are clear evidence of the currency misalignment,” says Andres Abadia, chief Latin America economist at Pantheon Macroeconomics. Like many other analysts, Abadia estimates the peso is at least 20 percent – and perhaps as much as 30 percent – overvalued against the dollar. And it is this overvaluation, almost more than anything else, that is sparking a run on the currency that Milei himself has called a “panic.”
Maintaining investor confidence in an overvalued currency is always a challenge for policymakers, but especially at a time like now, when signs are mounting that Milei is losing the popular support he needs to extend deep fiscal cuts and implement his free-market reform agenda. With key midterm congressional elections slated for late October, investors have been frantically yanking their money out of the country, fearful Milei will run out of dollars and have to abandon his defense of the peso.
Milei and his economic team argue the peso is fairly valued and vow, as they have for months, that they won’t let it plunge and reignite inflation. But not even a pledge by the US to help Milei – a close ally of US President Donald Trump’s – stave off a devaluation has done much to slow the outflows. After a brief pause, they picked up once again last week.
So much hard currency is being spent in Chile – the tally now runs into the billions of dollars – that Argentine customs officials have begun to crack down. They pop open car trunks and suitcases along the mountain-pass border stops and impose fines on those caught bringing back goods worth more than US$300. The spending-limit rule has been on the books for decades but only now, travellers say, are officials enforcing it, albeit sporadically.
“Even with a fine, it’s often still cheaper than buying the same thing in Argentina,” says Lur Carreras.
Carreras, a travel agent who arranges bespoke shopping tours for young women, is part of a cottage industry that has quickly popped up to tap into the boom. There are bus tours set up just for shoppers and social-media influencers hawking bargain-hunting tips and even personal shoppers – think Instacart but purchased over the border instead of across town.
One of those shoppers is Gabriel Damiani. He started a couple months ago after seeing his girlfriend make a lot of money as a personal shopper.
Damiani worries that he’s discovered the business a bit late: if the peso suddenly craters, like it has so many times before, the boom will come to an abrupt end. This possibility was on Analia Raymundo’s mind, too, as she strolled out of an H&M store in Costanera Centre the other day with her mother and daughter. “Some times it’s a good moment to buy,” Raymundo said, “and some times it isn’t.”
For now, the frenzy shows few signs of abating.
Raymundo’s shopping cart was piled high that day with bags from H&M and other stores. And a couple blocks over from the Marriott, Nathalie Díaz observed a scene at the Hotel Boulevard Suites that rivalled the one Carolyn Pérez had witnessed.
Diaz, a hotel receptionist, describes watching this family of Argentines pile box after box of items they had bought into their brand-new Ford F-150 truck. Once filled to the brim, they pulled out and headed for the border.
Minutes later, they turned around and rushed back to the hotel, where the staff was waiting to hand over two full boxes of purchases they had left behind.
by Matthew Malinowski & Antonia Mufarech, Bloomberg
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