dospesos-1612As we counted the piles of 100-peso bills on the desk in front of us, keeping half an eye on the door to our left, we couldn’t resist passing comment. ‘To Europeans like us,’ we said, softly, ‘this is quite an unusual transaction.’

Peering over half-specs, the man across the counter looked us in the eye for the first time since we entered his office, tucked away in the basement of a mall on the busiest shopping street in Buenos Aires. He offered the faintest of smiles.

‘The economic history of our country is very…’ He paused, searching for the right word. ‘Complicated.’



Argentina’s economy confuses even those who live here. But to European outsiders drawn by the apparent sophistication of its major cities, its instability and illegality is breathtaking. We loved many things about our three months in Argentina, and we’re sad to have left. However, nothing surprised us more than its confused politics and the parlous state of its finances.

Transients like us will never truly understand today’s Latin America, in large part because we didn’t live through the events that created it. The 20th-century story of South America is a litany of military coups and revolutions, dictatorships and uprisings, dramas and crises. Together, they make a thrilling narrative for history books. Even so, this recent past remains near-unimaginable to a pair of travellers struggling to comprehend the continent from its streets rather than through the necessarily reductive dispatches sent home by foreign correspondents. The more you learn, the less you know.

Democracy, of course, is a novelty in many countries here; it only returned to Peru in 1980, Argentina in 1983 (after the Falklands War) and Chile in 1990 (post-Pinochet). High-level corruption apparently remains endemic, most notoriously in Brazil. And the economies are unfathomable: the titanic gaps between rich and poor in Brazil and Chile (by some measures, the worst in the world); the ongoing chaos in oil-rich but cash-poor Venezuela; the time bomb currently ticking under Argentina.



banner-1398The roots of today’s crisis in Argentina lie in the epic collapse of the late 1990s and early 2000s, when a perfect storm of factors – including but not limited to an artificially high dollar-peso exchange rate (fixed by the state), wildly excessive government borrowing and a global financial downturn – caused chaos. The economy shrank by a scarcely believable 28% as the peso became essentially worthless, the government defaulted on its debts and the country went through five presidents in four years.

Two decades later, the main question is whether this collapse will be as bad. Cristina Fernández de Kirchner’s government has long insisted that inflation is around 10%, but most independent observers reckon it’s closer to 25-30%; even the International Monetary Fund has accused the Kirchner regime of lying. (One key signifier: prices on menus are invariably written in pencil or covered with stickers.) In desperate attempts to keep money from leaking out of the Argentine economy, protectionist regulations make it nearly impossible for many retailers to import goods for sale, while credit card payments made abroad are subject to a tax of 35%.

It doesn’t seem to be helping. The peso is in freefall and local trust in the native currency is at rock bottom. Many of those with money are looking to secure their peso holdings in a more stable currency such as US dollars, but prohibitive restrictions on such transactions have created a thriving underground exchange market. There are now two exchange rates: the official rate and the unofficial, black market rate, known for some reason as the ‘dólar blue‘ rate (always ‘dólar’, never ‘dollar’).



For locals, the blue market is a nuisance at best and a crisis at worst. It’s a different story, though, for visitors with the forethought to arrive with a pocketful of US dollar bills to change for pesos at blue rates. (We stocked up in neighbouring Uruguay, where they’re available in every ATM.) The deep discounts that the blue market affords outsiders is akin to the entire country advertising a gigantic going-out-of-business sale.

On the October day we arrived in Buenos Aires, for instance, the official exchange rate was AR$5.8 to the US dollar. Changing US dollar bills into pesos on the blue market, we got a rate of AR$9.6 (AR$15 to the UK pound, more or less), leaving us 60% better off than we’d have been had we gone to an ATM or paid for everything with cards.

The blue market is illegal. However, you wouldn’t know it from walking up Calle Florida, the main shopping street in Buenos Aires. ‘Cambio, cambio, casa de cambio,’ goes the call from lone men (and the occasional woman) in broad earshot, though kerbcrawling for trade isn’t the best way of finding a secure source of pesos. Addresses of trusted blue-market cambios in Buenos Aires are well-kept secrets; word of mouth is more reliable than Google. The blue market is harder to find outside the big cities but it’s laughably blatant in the likes of Mendoza, where broad-daylight exchanges take place outside a large mall on the main avenue, and Salta, where a shifty-looking chap unfurled a brick-thick wad of 100-peso notes when we approached him in the central square.



evita-1400The government has recently tried to bring the two exchange rates closer together by subtly devaluing the peso. It hasn’t worked. Today, the official rate is AR$7.8 to the US dollar, having fallen more than 35% in four months. The blue rate, though? AR$11.9, still more than 50% worse for locals (and better for visitors). The government’s latest gambit, announced last week, is a new inflation index that may prove to be more honest than the last one, but no one is holding their breath.

The next presidential election is due to be held in October 2015, by which time it should be clear just how bad things are likely to get. But few locals seem terribly optimistic. We were repeatedly told that with all the major candidates likely to espouse some variation on Peronism, a messy, often contradictory ideology that’s dominated politics here for years (that’s Eva Perón in the picture above), change may be limited to the name of the president. And to understand why, you probably need to have spent much more time in Argentina than we did. The more you learn, the less you know.

from Arequipa, 04, Peru