Argentina: ‘blue dollar’ passes the 1,000 peso level for the first time

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In addition to electoral tensions, the parallel dollar suffered a new boost with new government control measures to stop the outflow of currency from the country. Dollar banknotes bearfotos/Freepik The “blue dollar”, the main parallel exchange rate used in Argentina for the American currency, surpassed the 1,000 peso level for the first time, following the strong upward trajectory prior to the presidential elections in the country. This Tuesday (10), the Argentine government announced a unification of three parallel exchange rates for the dollar — the solidarity, Qatar and tarjeta — for tourism and savings, to which taxes are applied to discourage the purchase of foreign currency. This is yet another measure to stop the flow of dollars from the country, which is seeing a strengthening of the currency crisis on the eve of the election of a new president. The country suffers from galloping inflation, the lack of credibility of foreign investors and also the lack of monetary reserves. In comparison, the official exchange rate for the dollar in Argentina is around 365 pesos. Whenever measures like this take place, there are impacts on the blue dollar because it circulates free from intervention by authorities. And he was already on a strong run due to the economic scenario and electoral uncertainties. On Monday (9), the ultraliberal candidate for president of Argentina, Javier Milei reaffirmed his plans to dollarize the economy and recommended avoiding the Argentine peso. He is the favorite in the polls for the October 22 elections. “Never in pesos, never in pesos. The peso is the currency issued by the Argentine politician, so it cannot even be worth excrement, because this rubbish is not even suitable for fertilizer”, declared Milei in an interview with Radio Miter. In addition to the new attack on the peso, Milei reiterated “the conviction of closing the Central Bank, which is done in practice by dollarizing”. “But then we’ll choose whatever currency we want.” There is great concern among economists about the proposal, because the country would need to have at least enough international reserves to guarantee that the population has access to American currency in the first place. Furthermore, Argentina would be dependent on the interest rate decisions of the Federal Reserve, the American central bank. READ MORE With more than 10 quotes, understand how Argentina established the ‘blue dollar’ instead of the official exchange rate What is the ‘blue dollar’ and why its high value shakes Argentina Find out more about the blue dollar: What is the blue dollar and the difference in the official Argentine exchange rate? How is the blue dollar traded? What caused Argentina to reach this crisis? What risks could the country face if it were dollarized? ‘Vaca muerta’, the new exchange rate for the dollar What is the ‘blue dollar’ and what is the difference to the official exchange rate? 🤔 The blue dollar has a similar dynamic to any exchange rate: it has its price, which varies every day, and the appropriate trading rules. The difference to the official exchange rate is precisely the way in which the currency rate is defined. The official quotation is defined based on the conversion of a foreign currency into the peso, carried out by institutions regulated by the Central Bank of Argentina. The blue dollar, on the other hand, has its price set by unregulated institutions, which sell the currency at whatever price they want, depending on demand. ➡️ In addition to the blue dollar, Argentina has more than 10 other rates for the dollar, created with the aim of trying to contain the outflow of currency from the country — in addition to stimulating entry. How is the blue dollar traded and what are the risks? 💵 In Argentina, as it is an unofficial transaction, it is possible to negotiate the “blue dollar” at newsstands, restaurants, hotels, stores, even with taxi drivers or anyone who has possession of the American currency. The establishments that carry out this type of negotiation are called “cuevas” and are mostly concentrated on Florida Street, in Buenos Aires. “The blue dollar is an illegal parallel market, which escapes the supervision of the Argentine Central Bank, which has no traceability. Where did these dollars come from? They come from crime, trafficking, tax evasion, money laundering”, he states FGV economist, Carla Beni. “This market is a parallel market, which has no regulation, there is no way to complain and there is a huge amount of fake notes,” she says. Furthermore, the price of the blue dollar is more subject to variations, since whoever does the negotiation has the freedom to choose the value they want to sell. What made Argentina reach this crisis? 😬 We can say that what caused Argentina to reach this crisis was the imbalance in the balance of payments. What does that mean? Argentina imported more than it exported, that is, it spent more than it earned in foreign currency. According to the National Institute of Statistics and Census (Indec), Argentina’s exports fell by 10.9% in the second quarter of this year compared to the same period of the previous year, while imports rose by 4.3%. To try to pay off its primary debts, the country: started printing more pesos (the national currency); and took out high-value loans from international creditors, such as the International Monetary Fund (IMF). And why is this bad? When a country puts more currency into circulation, pressure on consumption increases and the relationship between supply and demand within the country is disrupted. Because of this, prices may rise, reinforcing inflation that is already high; and Argentina borrowed money from financial institutions and did not pay, made successive agreements with the IMF and did not comply. The low dollar reserve is the main reason for Argentina not fulfilling its international commitments, which reduces international trust in the country, driving away investors and financiers.

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