Will traveling to Argentina become more expensive with Milei? – 15/12/2023 – Market

Traveling to Argentina could become more expensive for tourists in the coming months, with the measures that new president Javier Milei is implementing to try to lower inflation. The neighboring country, however, should continue to be a comparatively cheap destination for Brazilians, economists say.

Credit card payments, previously disadvantageous compared to cash, are also no longer unfavorable, at least for now. Experts consider that the dollar and prices are very volatile in the country at the moment, so it is still difficult to do the math on the tip of a pencil.

“Coming to Buenos Aires, Mendoza, ‘Brasiloche’, as we call Bariloche, will continue to be cheap for you Brazilians, but it won’t go back to what it was like last winter. The dollar or the real will be worth the same, while prices will rise by around 25% per month, over the next two or three months”, summarizes Andrés Borenstein, professor of macroeconomics at Torcuato di Tella University.

Argentina currently 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.

To understand why the trip can be more expensive, you need to know two of these exchange rates: the official dollar, which is used in large-volume commercial, banking and financial transactions, and the parallel “blue” dollar, which is found in cash by tourists at parallel exchange offices and Western Union, for example. It is not controlled by the government, but by supply and demand.

Until last Tuesday (12), the difference between these two dollars was very large — the official one was costing 366 pesos, and the parallel one, more than 1,000. What Milei did, with the intention of making the official exchange rate more “real” and, later on, unifying exchange rates, was to raise the official dollar to 800 pesos.

This means that all products and services will become more expensive. A wave of price markdowns has already begun in supermarkets, stores and gas stations, as previously prices were contained and controlled by price agreements made by Alberto Fernández’s government.

Still without much reference, however, the percentages of these increases have varied greatly depending on the product, the supplier and the trade at the end.

Well: despite the rise in the official exchange rate, the dollar or “blue” real, which continues to be advantageous for tourists, did not grow as much. In the last week, even with the government’s economic announcements, the dollar was around 1,000 pesos, and the real was around 200 (despite high volatility).

“People and financial institutions didn’t go out desperate to buy dollars. There is a certain credibility for the fiscal adjustments that the government promises to make, even if no one knows if it will actually work”, explains Borenstein, who was chief economist at BTG Pactual in Argentina from 2014 to 2020.

In short, prices are rising, while the dollar and real used by tourists are remaining more or less at the same level, which will make the trip a little more expensive. Still, the difference so far is not so big that it is necessary to cancel tours or avoid restaurants, for example.

“This increase in the official exchange rate [determinado pelo governo Milei] it affects Argentines much more than foreigners”, says economist Ignacio Galará, from the Center for Monetary and Financial Studies in Madrid.

He remembers that another important exchange rate for Brazilians is the so-called MEP dollar, used on credit, debit and international cards.

If until the beginning of the year making payments using this method was extremely disadvantageous, currently this rate (1,004 pesos this Thursday) is very close to the “blue” dollar in cash (990).

“There are no major differences between MEP and blue, it is more or less equivalent”, says Hernán Letcher, director of the Argentine Center for Political Economy. “It’s the famous whatever, as you say in Brazil”, says Borestein.