illegal but part of life

It’s hard to come by but ubiquitous in the minds of average Argentines: the US dollar, whose value against the weak peso is a barometer of an economy in crisis.

“Dollar! Small change, small change, doooolars!” The cries of unofficial money changers follow tourists, but also locals, through the streets of the central business district of Buenos Aires.

It’s illegal, but part of life: these “arbolitos” (“little trees” that sprout after the “green leaves”) offer a black market price about double the official one.

“It’s a service to the community … part of the normality of the country,” an arbolito told AFP on condition of anonymity.

Today, a dollar at the unofficial or “blue rate” costs about 236 pesos instead of 130 at an official exchange office.

A year ago the blue rate was 170 pesos versus the official rate of 95.

The peso is Argentina’s official currency, but its high volatility means dollar prices are quoted for large items, from buying a property or car to renting an apartment or getting expensive medical treatment.

To prevent foreign exchange reserves from bleeding out and stabilize the peso, since 2019 Argentines have been banned by law from buying more than $200 a month in greenbacks.

This, of course, fuels demand, and Argentines – also suspicious of savings accounts – are hoarding as much US currency as they can afford to buy on the streets.

Merchandise saleswoman Marcela Leiron said that she gathers groceries “like an ant,” she buys dollars, “from $20 to $50 a month, as much as I can.”

The 56-year-old told AFP she has resigned herself to living off the dollar “because of the economic chaos that no government can fix.”

The black market, in turn, is fueling inflation, which reached 60.7 percent for the year to May – one of the highest rates in the world.

People like Leiron are so desperate for dollars that they pay to change pesos even though they know they’ll have to change them back later to pay for certain goods or services.

“In bi-monetary societies like Argentina, where the dollar is the reference and … reserve of value, people save in dollars,” said economist Andres Wainer of the Latin American Faculty of Social Sciences.

It’s a double-edged sword: people might want a strong dollar because it means their savings are worth more, but at the expense of Argentina’s own economy.

In 2021, economist Nicolas Gadano — a former central bank governor — estimated that Argentines owned about $200 billion worth of banknotes — 10 percent of all dollars in circulation worldwide and one-fifth of those outside the United States.

In Buenos Aires, cafes and shops display the exchange rate at which they give change to customers paying in dollars.

The signs are aimed at tourists, as every Argentine knows never to hand over dollars.

“The trick is to buy, always buy dollars!” said Marcela, who thinks and calculates in greenbacks and has no idea what her rent is in pesos.

“The Argentine saves in dollars and when a crisis hits, he sells. He will never regain confidence in the peso,” another Arbolito told AFP.

The currency has lost 43 percent of its value against the dollar over the past two years at the official rate.

“As long as there is this inflation, it is obvious to operate in dollars. We don’t have a strong currency and we don’t have controlled inflation,” Alejandro Bennazar, president of Argentina’s Real Estate Chamber, told AFP.

Despite government attempts to stem dollar flight, gross foreign exchange reserves fell to $38.1 billion this week from $41.5 billion at the end of May – about the same level as a year earlier.

In recent days, the central bank announced measures to limit certain imports to further protect foreign exchange reserves amid rapid increases in food and fuel prices, partly due to the war in Ukraine.

Sociologist Mariana Luzzi, author of a book on the subject, said that for all Argentines, regardless of their social class, the dollar is “a key to interpreting the country’s economic and political movements”.

“We Argentines know very well that a rising dollar heralds trouble: it will lead to price increases, but more fundamentally, it means that something important is happening in the economy that the government cannot control.”