The Blue Market

Argentina has had major financial crises at the rate of about 1 every 5 years, and currently they are in a state of very high inflation. Past crises have included financial collapse, mass devaluations, and banks that restricted withdrawals to periodic maximums (the sort of things that tend to bring on mass demonstrations). Not surprisingly, people have little to no faith in the banking system, and tend to spend-it-when-they-have-it.  They say this accounts for their joie-de-vivre and desire to live life for the moment.  

At one point, the Argentine peso was officially pegged at 1 peso per US dollar, but after a couple of years, this was not possible to maintain, and the official exchange rate has gradually slipped from 1 peso per USD, to 1.25 peso per USD, then 2, then 3, and on… Currently, the official rate sits at around 8 pesos per USD.

However, people that want to save for major purchases have a problem – they money they save today will be worth less tomorrow. So... they tend to save their money in USD. They make money in pesos, then buy USD. I suppose they think of it as an investment that is very likely to appreciate in value. Canadian dollars need not apply.

So… where to get USD? Well – I am sure there are lots of ways, but one relatively easy way to get USD is from tourists. In comes the ‘Blue Market’ and the money changers. Another one of those ‘not quite legal’ arrangements that are openly accepted.

There are areas in town (mostly high-traffic tourist areas) where people will buy your USD and give you pesos at much higher exchange rates – up to 11 or 12 pesos per USD. We were told they were referred to as ‘Money Trees’ because if you shake them, money would fall out. A money-changer was enlisted to help us make our pesos go further, and the experience was very interesting. No pictures in this post – I expect you can understand why.

We met in a private place, and he carried wads of pesos in a plastic bag around his lower leg (under some soccer socks – of course). The rate we got for our funds was 12.75 pesos to the dollar, as long as we had USD in denominations of 50 and above. For bills under 50, there was a 3% reduction in the rate. He spoke perfect English, and showed everyone the calculations for their exchange on his smartphone. It was all very civilized.

Being the inquisitive person that I am, I asked questions about the whole process. Apparently he is actually employed by a ‘stock broker’ organization. He makes a commission, and passes the USD back to his employer. People interested in taking advantage of this ready source of USD go to the same ‘stock broker’ and buy the dollars. When I asked if the people saved the dollars in their mattress, he replied that they were mostly in safes – at the bank, in homes, or in businesses. No bank accounts - they are not safe. This is the reason why bills in small denominations are not as desirable – they take up too much space.

When we were all done, he took his new stash of USD and placed them in the same red plastic bag around his leg, pulled up his soccer sock, and was gone. Very interesting…