Copyright John T. Reed 2014
This is a report from a reader who recently took a month-long vacation in Argentina along with my comments in red.
John T. Reed
Hey John - I just had a month long vacation to Argentina and thought you might be a little interested in hearing a few things about it.
Firstly, thank you for your article on dollar blue, I left with my pockets stacked with US dollars and it really really helped. I heard countless tourists lamenting that they didn't know about it when they arrived and were forced to withdraw at the official exchange. (One of my friends read the dolar blue article after they came back and said the same thing. They had no clue about dolar blue before hand and subsequently had to do almost all exchange at the lousy fantasy land official rate.) At the time I went, official was sitting around 8 pesos/US$ and dollar blue was sitting at 12 pesos - seems to have gone down a bit but I'm extremely doubtful in that trend having been there.
Purchasing US dollars is now legal, but comes with a couple of pitfalls:
- It's taxed heavily (I forget specific, but somewhere over 20%)
- you're tracked as 'having money'. This means that government subsidies such as what they give for utilities and medical no longer apply to you.
Mortgages pretty much don't happen, they are tailored in such a way that those who can get a mortgage are those who don't need one. (30-year, fixed-rate mortgages only exist in the U.S. and I think some government program in Denmark.)
Interest rates on credit cards are beyond 80%. (In my article “The Day the Dollar Dies,” (http://www.johntreed.com/thedaythedollardies.html) I predicted that all credit cards would immediately be canceled and that merchants would stop accepting them anyway because of the delays in the consumers paying the credit card company and the delay in the credit-card company paying the merchant. Only debit cards would work and be accepted. I am surprised to hear they still have Argentine peso credit cards.)
People are just fed up with having an unstable economy. Across the line, it seemed that people couldn't get over the fact that they could save up and save up for a year, plan to travel - then by the time they are ready to travel their savings are worthless. This applies to cars/houses/air conditioners, etc... You might save up your 10000 pesos to buy an air conditioner only to get to the store and see a new price sticker of 18000 pesos. (It is beyond my comprehension that Argentinians save pesos. I have urged Americans to not save in the form of USD-denominated assets and we do not yet have hyperinflation. Argentina already has high inflation and they are still saving pesos!? WTF?)
No one puts their money in the bank, they don't trust their banks or their government. Resulting in a lot of pesos being stuffed in mattresses. (Bank, mattress, it makes no difference if it’s pesos. Purchasing power will evaporate by the hour. In high-inflation countries, people must treat the inflated currency as if it were a hot potato or cooking grenade. They need to convert the money into hard assets or stable foreign currencies. I am aware the latter is hard to do in countries with high inflation.)
I stayed at a guest house that would literally take any currency you could give aside from the peso. She opened up gift shops and would literally buy her product from across the street knowing that those sweaters and nick nacks would be worth more in a year then her pesos.
They have incredible restrictions on import. I literally only saw Argentinian stuff there. Things that seem non-Argentinian (such as Toblerone, Stella and a few other things) are actually produced there and exported to neighboring countries. There is a heavy amount of protectionism and the people notice that the quality of stuff is frequently crap. What's strange is that this isn't like China where people are looking for an envelope (bribe), you can't even pay people off to get things moving through customs/importation.
Owning real-estate is apparently the gold mine since you can charge what you want for rent. (I’m surprised to hear that. No rent control in a socialist country? And where do the tenants get the money to pay the ever increasing rent?) There's nearly no resale market, people buy and rent out. All listings are quoted in US dollars of course.
Wages seemed like a perpetual problem....people certainly don't get raises proportional to inflation. I had a friend who was an doctor and she was considered low income because she's paid in pesos. Anyone unionized is considered to make good money because the unions get the raises, this is especially true in the transportation industry. All in all, this reminded me a lot of the book you reference often 'when money dies'....professionals end up being the least paid. Very little to no trains there, so all trade/transportation is controlled by trucks. The truckers are controlled by the largest union, and it's said that you can't just 'join' that business, you're born into it or you've paid someone a lot of money to get into that industry,
The social programs are apparently insane. Now I haven't verified this, but everyone said that people could come from any country and get free health care and free university. Apparently it's an issue where people come from neighboring countries to get the free university, then leave and go back to their own country to practice.
That's about all I got - a final thought. I've traveled a lot, and this was my first experience ever, where people would ask me "Why did you come here?" with bewilderment. This is different than poor countries. Poor people in poor countries understand that they have poverty, have learned to live with being poor and accept that other countries are rich. This was different, people seemed...fed up...and just wanted stability. It's better to be poor, then to live in perpetual instability. "If there's something I envy about you guys up north, it's that you have stability. You can save and buy a house, and pay off that house, and buy a car. You aren't worried that tomorrow your grocery bill might triple"