With more than 10 quotes, understand how Argentina adopted the ‘blue dollar’ instead of the official exchange rate

[ad_1]

This type of negotiation has become popular due to the ease of exchanging at newsstands, restaurants, hotels, stores, even with taxi drivers. Gustavo Garello / AP Photo O Still on the path of trying to contain the flow of dollars from the country, Argentina’s Economy Minister, Sergio Massa, announced this week the creation of another quotation for the dollar: the “vaca muerta”. The new price tries to stop the flow of dollars from the country, taking advantage of the moment of record oil and gas exports. The inputs are produced at the Vaca Muerta hub, where the name of the new quote came from. (learn more at the end of the report) In the midst of a severe financial crisis, Argentina has more than a dozen exchange rates in force in the country. With an inflation rate of around 120% over the last 12 months, many Argentines prioritize the use of the dollar, which is a more stable and valued currency. The problem is that the government does not have enough reserves to meet all demand and has imposed a purchase limit of US$200 per person per month, further reducing supply. And thus, the main parallel quotation was created: with the restrictions, the population began to buy and sell dollars through unofficial means, basing the value of negotiations on an illegal quotation that escapes state supervision, known as the “dollar blue.”0 But the crisis is such that there are also several other unofficial quotations, created for specific situations, as was the case with the vaca muerta dollar. At the time of the Football World Cup, the government itself created the “Qatar dollar”, a rate applied to credit cards for tourists who were going to enjoy the World Cup. In the same period, the “Coldplay dollar” was created, a variant for hiring international attractions for shows within the country. Problems with the Argentine currency are the origin of one of the main proposals of Javier Milei, far-right candidate and leader of the country’s electoral race. He proposes that the Argentine economy be entirely dollarized, to curb galloping inflation in the country and end parallel prices. (see also below) g1 spoke with experts in international economics to better understand what the blue dollar is, how it is traded and how so many crazy prices arise in the neighboring country. You will see in this report: 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 the currency rate is defined, according to professor Cristina Helena Pinto de Mello, from PUC-SP. 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. See the main prices, based on this Thursday’s exchange rate (28): mayorista dollar (wholesale): quoted at $350.03, intended for importers and banks that wish to carry out transactions abroad; dollar tarjeta (card): priced at $639.62, it is used to pay for services in dollars (such as Netflix or Amazon subscriptions), or purchases abroad. If the value is less than US$300, there is a 75% fee on the purchase price; tourist dollar (or Qatar): quoted at $659.93, it is intended for Argentine travelers who make purchases abroad with a credit or debit card. If the transaction exceeds US$300 in a period of one month, it will be necessary to pay a fee of 100% of the purchase value; MEP dollar (or stock dollar): quoted at $689.85, valid for the purchase and sale of public bonds and shares. Bonds must be quoted in both pesos and dollars. They are purchased in local currency and sold abroad; ‘counted-settled’ dollar (CCL): quoted at $794.40, is similar to the MEP dollar, however, the dollars are deposited abroad. This is a legal way to take dollars out of Argentina; vaca muerta dollar: aimed at the oil and gas sector and will come into force from October 1st. It will use the same exchange rate as the ‘CCL dollar’. But how is this average calculated? Quotes are published at the end of the previous day or in the morning of the day in question. The price is calculated by averaging everything sold by exchange offices that day. People end up following this reference to try to find the best option. 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. “After several defaults with international creditors, there is no longer any credit available. So, the way to pay everyday bills is to issue currency. This generates inflation”, explains the professor of economics at Universidade Presbiteriana Mackenzie, Josilmar Cordenonssi. What risks could the country face if it were dollarized? 💵 Changing a country’s currency is not as simple as it seems. However, the issue came into the spotlight during Argentina’s primary elections in August, after far-right candidate Javier Milei suggested the dollarization of the economy and the closure of the country’s Central Bank. In Argentina, the population receives their salary in pesos and — with inflation out of control and the local currency devalued — seeks a guarantee by purchasing and reserving dollars. According to experts interviewed by g1, for Argentina to exchange the peso for the dollar as its official currency, the country would need to have at least enough international reserves to guarantee that the population has access to American currency at first, which does not happen in practice. Even if Argentina started using the dollar as its official currency, there would be an important consequence: the country would depend on the American Mint to import the currency. Furthermore, it would be dependent on the interest rate decisions of the Federal Reserve, the American central bank. Because of this, the country would lose its autonomy as an independent nation and would be subject to United States monetary policy. According to professor Cristina Helena, from PUC-SP, there are two ways for Argentina to have access to dollars: either the Fed buys Argentine pesos or the country’s debt securities. “To deliver dollars to Argentina, the Fed would have to accept the peso, which has almost no value. Why would the Fed buy the peso?” she asks. “The other alternative would be to buy Argentine debt bonds, which are not being paid. They are negotiating on top of negotiation. Why would the American Central Bank buy Argentine bonds?” ‘Vaca muerta’, the new exchange rate for the dollar The new exchange rate was announced last Wednesday (27) and can be used from October 1st, to facilitate oil and gas exports. It will remain in force until the 25th of the same month, with the possibility of being extended until November 25th. This exchange rate is aimed at the oil and gas sector and will follow the same exchange rate as the ‘CCL dollar’ – currently quoted at $794.40, according to the newspaper “La Nación”. During this period, companies in the sector will be able to negotiate 25% of oil and gas exports through this new price. It is worth remembering that the government creates quotations with the aim of retaining the outflow of dollars from the country and, consequently, stimulating its entry. * Intern under the supervision of Raphael Martins

[ad_2]

Source link