Currency exchange rates are on everybody’s lips in Argentina. You don’t have to spend a long time in Argentina before you realize that. The Argentine peso’s rate compared to the American dollar is a topic of small talk in the street and very frequently discussed in the Argentine media too.
Since 2019, the Argentine peso’s exchange rate to the American dollar has been even more confusing since a parallel official and unofficial exchange rate system was installed. This means that there are actually two exchange rates to keep track of. And the difference between them can get as high as 50%.
But what does all this mean? Why is it so? Why it is important for you when traveling to Argentina?
In this beginner guide to currency exchange rates in Argentina, I want to give you a short introduction to one of the most discussed issues in Argentina: The Argentine Currency Exchange.
Read here for more practical tips about how to exchange your money in Argentina.
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Currency Exchange Rates in Argentina
I’m from a country where our currency is stuck to the euro at a fixed rate with a tiny plus/minus percentage fluctuance.
So, living in Argentina for more than 6 years has been one big class in macroeconomics. This might sound boring. But when you live with it every day, you get another interest in it and learn about it in another way.
This is a super complex topic. There have been written many many academic articles about this theme. I’m no expert in exchange rates – I simply became fascinated with the topic from living in Argentina.
This will be a very light little pocket guide, but hopefully, it will also help you understand Argentina better.
The Basic Currency Exchange Rates in Argentina
A country’s exchange rate is the value of the currency compared to other countries’ currencies.
An exchange rate determines the relative price between foreign and domestic goods.
The exchange rate is affected when a country suffers high rates of inflation (i.e. price increases). Both the exchange rate and inflation are affected by the money supply in a country’s economy.
An increase in inflation might cause a country’s currency to depreciate e.g. lose value compared to other currencies – which is what has happened over and over again in Argentina!
Apart from that, decreasing exchange rates might also be a sign of decreasing investor confidence in the local market.
In Argentine media, they normally compare the Argentine peso to the US dollar. However, if you are wandering the streets of any major city in Argentina looking to exchange for Argentine peso, you will see the peso compared to a wide range of other currencies. And you can easily exchange most major currencies at the exchange offices.
Nevertheless, if you have the option to bring US dollars with you to Argentina, you might get a better rate than with other currencies.
The US dollars are always in very high demand in Argentina because most Argentines have their savings in dollars.
The exchange rate of the Argentine peso is a floating exchange rate. A floating exchange rate refers to the rate of a country’s currency being determined freely based on the demand and supply conditions in the market.
The Central Bank should not intervene in the exchange rate. Nevertheless, due to the insane fluctuation in the Argentine peso, the Argentine Central Bank tends to infer anyway by placing limits on the exchange rate.
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Why Are Currency Exchange Rates Such an Issue in Argentina?
It is a super hard question to answer! And if we had the answer on how to stop the crazy peso fluctuations, we would properly be heroes in Argentina by now!
As mentioned above, a country’s currency exchange rate reflects both its inflation rate and the investor confidence in this local market. What is happening in Argentina is a combination of those two factors – among many others, actually.
A depreciation of a country’s exchange rate will make products listed in a foreign currency relatively more expensive. This decreases the general Argentine public’s purchasing power when going abroad or buying products from abroad.
Similarly, it makes the purchasing of imported foreign goods more expensive in Argentina. Also, decreasing the local Argentine purchasing power.
Countries want to keep their exchange rate as stable as possible. Since it is assumed to help promote trade and investment and thereby create more economic stability.
These are just some of the reasons why the Argentine peso’s exchange rate is such a huge issue.
A Bit of History on Currency Exchange Rates in Argentina
Argentina has a long history of economic instability. After the democratization in 1983, Argentina struggled with hyperinflation. The government and Central Bank could not get it under control, no matter how hard they tried.
In 1991, the government took a radical step to drive inflation out of the economy. Argentina adopted a Currency Board, and tied the Argentine peso to the US dollar at a one-to-one parity.
The introduction of this Convertibility Law was successful and broke with the inflationary dynamics. Little by little, inflation started to decrease.
However, around 1995, economic growth started to decrease. The Argentine economy saw itself hit into another recession. This and a variety of external factors resulted in the
In 2001, Argentina had to stop the Currency Board. The country hit state bankruptcy, and heavy political and social turmoil broke out.
Today, it is common to hear Argentines refer to this as the 2001 crisis (in Spanish, la crisis de 2001), and it is still very present in the mind of most Argentines.
Since the 2001-crisis, Argentina has been haunted by the ever-increasing inflation and devaluation of the Argentine peso.
In 2003, the Peronist party’s candidate, Nestor Kirchner won the presidential elections. In the following 12 years until 2015, Nestor and his wife Cristina Fernández de Kirchner ruled Argentina.
Under the Kirchner government, they implemented trade restrictions that aimed at protecting the national industry.
The official currency exchange rate was kept artificially down. While the unofficial currency exchange available for most common Argentines went through the roof. Inflation also increased dramatically.
In 2015, a new era was assumed to begin in Argentina. The center-right candidate, Mauricio Macri won the presidential elections. However, Macri was also unsuccessful in adjusting the Argentine economy.
The Macri government focused on ending currency restrictions and letting the peso float freely (or with minor political interventions). However, the Argentine peso was also on a wild ride during Macri’s government.
In 2019, the Peronist party won the presidential elections again. And once again, they installed currency restrictions.
Once again, two parallel currency exchange rate systems are operating in Argentina. An official exchange rate, which is held artificially low, and an unofficial (also called “blue”) exchange which floats a lot more. Read more about it here.
How Do Currency Exchange Rates Affect You When Traveling to Argentina?
When traveling in Argentina the depreciation of the Argentine peso will usually mean that your currency will be worth more. So, you will be able to buy the same Argentine pesos (or goods and services in pesos) for a small amount of your own currency.
This means, of course, that traveling in Argentina will become cheaper for you.
How Do Currency Exchange Rates Affect You When Living in Argentina?
If you are earning your salary in another currency (usually, USD or Euro) or living on your savings in another currency, exchange rate fluctuations will have the same effect on you as if you were traveling: your currency will make it possible for you to buy more things in Argentine peso than before the depreciation.
However, if you are living in Argentina on a salary in Argentine pesos, the depreciation of the peso will make your salary
This is the situation that most Argentines face and the reason why many will do their savings in dollars.
Tips on Managing Currency Exchange Rates Fluctuation in Argentina
- Don’t carry too many Argentine pesos – only take out/exchange the amount of money you will need
- Check the current exchange rate at ambito.com which gives you both the official exchange rate and the unofficial one.
- Take some time to track down the best exchange rate in the exchange offices – they vary quite a lot! Read more about how to exchange your money in Argentina!
- Keep in mind that there are both official and unofficial exchange rate offices. And the unofficial tend to have better rates than the official!
- If possible, bring US dollars in cash – the demand is usually higher, and you will get a better rate for them.
Are you aware of the situation of the currency exchanges of the countries that you travel to? Did you know about the situation of the currency exchange rate in Argentina before reading this post? Did you find the post useful? Please let me know what you think by dropping your comment below!
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