Argentina becomes cheaper again with the rise of the dollar – 01/19/2024 – Market

Argentina became relatively cheaper for Brazilians again in January, after a more expensive December for foreigners in the country. This is because the dollar or “blue” real, the price found by tourists in parallel exchange offices, has risen again in recent weeks, after a “dormant” month at the beginning of Javier Milei’s government.

Paying with a credit card, which until November was disadvantageous compared to cash, is now no longer unfavorable for travelers, according to economists. However, it is necessary to consider the IOF (Financial Operations Tax) charge, which is 4.38% per purchase in 2024. The scenario is still unstable, and quotes change daily.

Since the ultraliberal president assumed the country’s presidency on December 10, Argentines have suffered an explosion in prices in general, as he ended the freezes imposed by the last Peronist government of Alberto Fernández and promoted a devaluation of the official peso.

While prices rose, however, the dollar or “blue” real found by tourists remained at the same level in the first weeks. In other words, foreigners stopped seeing their money appreciate daily in transfer companies like Western Union and in the so-called “cuevas”, exchange offices that are only prohibited in theory.

Since the first week of January, however, this trend has changed, and the parallel price has risen again due to a series of internal factors — among them a possible return of Argentines’ demand for dollars to escape the pesos, in the face of inflation that has doubled and the fall in income from investments in local currency.

So, for example: the tourist who exchanged money on December 29th, the last working day of the year, withdrew an average of 1,000 pesos per dollar or 190 pesos per real. Whoever did this this Thursday (18), almost three weeks later, withdrew more than 1,200 pesos per dollar or 240 pesos per real. It is an appreciation of more than 20%.

Even so, it goes hand in hand with prices, and some Brazilians report a feeling that tourism in the country is not as advantageous as they thought. The reference is usually the winter season, which was extremely cheap for foreigners, due to the long and constant devaluation that the peso was suffering at the time.

“I found the meal prices to be balanced with São Paulo, I paid around 50 thousand pesos [R$ 263 na cotação paralela da época] for two people”, says lawyer Cecília de Oliveira, 50, who spent last week in Buenos Aires with her son.

“I found electronics to be very expensive, so much so that I didn’t buy anything,” she says. In fact, products that are imported or have imported components still tend to be more expensive in Argentina, taking into account the restrictions on imports that existed until the last government, now removed by Milei.

Cecília took reais in cash and also paid some travel expenses using her credit card, which nowadays doesn’t make much difference anymore. By the end of 2022, purchases using electronic means in the neighboring country could cost twice as much.

The change occurred because the value of the “blue” dollar is currently very close to that of the so-called MEP dollar (electronic payments market), a reference for the rate charged on foreign credit cards in the country. Using international accounts like Wise can be even more advantageous, because the IOF is only 1.1%.

Argentine economist Ignacio Galará, from the Center for Monetary and Financial Studies in Madrid, considers that the parallel market is very volatile and changes day to day, so all these trends can change at any time. “Today I can tell you that ‘blue’ is more advantageous, but tomorrow it could be different,” he says.

He also gives a tip to those who are going to travel to the interior of the neighboring country: “It may be more convenient, or even necessary, to take cash and exchange it on the parallel market. Normally in these regions the exchange rate is much higher than in Buenos Aires , since there is less supply, and electronic payments are not usually as widespread. With cash, you can also get discounts.”

To this day, Argentina still has many limitations on purchasing dollars and lives with several different exchange rates, depending on the sector. These are policies used until now to try to contain the flight of American currency, as the nation is experiencing a historic shortage of reserves, caused by high external debts incurred throughout its various crises.

Milei promises to unify these exchange rates and allow the purchase of dollars, but argues that he needs to resolve the country’s deficits first, otherwise it would cause even greater hyperinflation. Therefore, he has now focused on cutting spending and public employees and on unlocking in Congress the radical reforms that he proposed through a decree and a package of bills.