Tag Archives | peso

Loss of Purchasing Power in Argentina – Pesos and Dollars Affected

Argentina allowed the peso to devalue by 17% on January 23, 2014, from $6.8 to over $8.0. Immediately, many merchants started raising their prices. The government decried these tactics as unwarranted and pushed to keep prices down. But, aside from the prices of staple foods which were frozen in advance of this, prices on most other goods have risen. Imported items have been especially affected as many foreign suppliers increased prices.

Here’s a personal example – We bought two imported Avent baby products from MercadoLibre on January 19, 2014:

  • Avent Bottle Sterilizer – $899
  • Avent Bottle Warmer – $599

At the dollar blue price at the time ($11.60), that worked out to U$S 77.50 and U$S 51.64 respectively. (For comparison, the bottle sterilizer from Amazon is $52.72 and the bottle warmer is U$S 29.51. So, we paid a bit of a premium, but not too bad for Argentina.)

Had we waited a few days longer to buy those items, we would have paid:

bottle sterilizer argentina 300x240 Loss of Purchasing Power in Argentina   Pesos and Dollars AffectedThat’s a 55.84% and 21.04% increase in the peso cost! And, as the gap between the official rate and the blue rate has also been reduced (it’s only at $12.00), the dollar prices have also increased significantly – U$S 116.75 and U$S 60.42. That’s a 50.65% and 8.78% increase and now puts them at more than double Amazon’s prices!

So, even though the peso only devalued by 17%, we’re seeing price increases of 21% and 56%. That’s crazy. In addition, even holding dollars is not enough to maintain your purchasing power as the dollar blue rate has not kept up.

Here’s one of my favorite examples of the price increases from a Reddit user: the price of the Samsung Galaxy S4 at Garbarino went from $7,999 pesos to $11,518 pesos – in 6 hours! (on January 23, 2014)

argentina samsung galaxy price increase Loss of Purchasing Power in Argentina   Pesos and Dollars Affected

Consumer purchasing power has been dramatically reduced and salaries have not been increased. Inflation is on track to hit more than 30% this year and at the moment, there’s no end in sight as the government’s foreign currency reserves continue to dwindle.

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Using Bitcoin in Argentina

argentina bitcoin aceepted 300x193 Using Bitcoin in ArgentinaWe’ve previously written about Bitcoin, the digital currency that has exploded in popularity (especially in Argentina). It has become a way for Argentines to get their savings out of pesos and for expats and foreigners to take advantage of the blue rate.

As Bitcoin has grown in popularity, more real world businesses have started to accept it as well. Here’s our complete list of places in Argentina that accept Bitcoin as a form of payment:

Buenos Aires

Other Parts Of Argentina

Know of any other places? Let us know and we’ll update the list.

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Using Bitcoin to Get the Dolar Blue Rate in Argentina

One of our more frequent topics is on the “dolar blue” rate in Argentina. This is the unofficial rate at which the US dollar trades in Argentina. Yesterday it hit a new record high of U$S 1 = ARS $9.40. That’s an 81% difference to the official rate and a great reason never to use your credit card or ATM in Argentina.

There are a few ways to take advantage of the dolar blue rate that we have discussed before:

  • Bring US dollars and convert at the blue rate.
    Pros: the best rate available
    Cons: theft, counterfeit bills, finding a cueva to exchange, technically illegal
  • Use a money transfer service like Xoom or Azimo and get a rate close to the blue rate.
    Pros: legal, transfer from your bank account overseas, relatively easy
    Cons: not available in all countries, must physically pick up money, paperwork required, rate good but lower than blue rate

A new method has emerged as well using the relatively new digital currency, Bitcoin. Bitcoin is a decentralized currency and payment system that is not under any government control. Check out the video below for a more detailed overview (or check out this Bitcoin course for a much more in-depth explanation):

Ok, so now you know that you know what Bitcoin is, how can you use it in Argentina to get the blue rate?

Argentines are not very fond of holding pesos – especially with inflation estimated at 25% – 30% per year. And with government restrictions on purchasing foreign currency or gold, many Argentines see Bitcoin as an investment opportunity that is outside of the government’s control. Unfortunately, the currency controls also make it impossible for Argentines to purchase Bitcoins online with pesos. This is where the trading process comes in. You purchase Bitcoins and then trade them for physical pesos at the blue rate.

Watch this short documentary film, “Bitcoins in Argentina,” for a great overview of the process:

Ok, so now you’re ready to trade Bitcoins, right? There’s a few steps you’ll need to take:

1. Get some Bitcoins
In order to get Bitcoins, you need to set up an account and purchase them. We’ve found Coinbase to be a great site to do this. This may take several days to set up, so don’t wait for the last minute.

2. Find someone to trade with
There are a few methods for finding a trading partner in Argentina – the Bitcoin Argentina Mailing List, LocalBitcoins, Bitcoin Argentina on Facebook, and Bitcoin Meetup. The mailing list seems to be the most active, but LocalBitcoins is growing rapidly. Once you find a trading partner, agree on the rate, pick a spot to meet and trade away!

So, what are the pros and cons of using Bitcoin?
Pros: relatively easy to use, completely anonymous, high exchange rate, works for people from almost any country, no need to carry cash, no paperwork
Cons: relatively new currency with high level of price fluctuation, must find a trading partner, must meet in person for exchange, false bills

The biggest con in my mind is the high number of price fluctuations and crashes that Bitcoin has experienced, however I think this can be somewhat offset as the seller by buying and selling in the same day. The buyer holding the Bitcoins has a lot more exposure to these price fluctuations. As for finding a trustworthy trading partner, a lot of the resources above will let you see what other trading the person has done before, and be sure and count the money before sending your Bitcoins.

Are you ready to start trading? Let us know in the comments if you do and what your experiences have been.

- Thanks to this Reddit post for more info on Bitcoin in Argentina.

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Dolar Blue Hits Record Highs After New AFIP Rules

dolar blue record highs 300x156 Dolar Blue Hits Record Highs After New AFIP RulesThe “dolar blue” has hit record highs for the past two days following new rules from AFIP (the Argentine tax agency) that imposed additional fees on the use of Argentine credit cards as well as on travel packages purchased in Argentina for travel outside the country.

First, AFIP raised the surcharge that Argentines must pay for using their credit cards abroad from 15% to 20%. This fee is applied to all purchase made in foreign currency, including Internet purchase. Then, they imposed a 20% tax on all travel purchases made in Argentina for travel abroad. This was designed to reduce the benefit of paying for your travel in pesos at the official rate while getting the blue market rate for your dollars (see example below). Argentine residents can get this 20% back when they file their tax returns.

Initially it was reported that non-residents would no longer be able to buy travel packages or airfare for travel abroad in Argentina, but it seems that this has been changed to allow them to buy the packages with the same 20% surcharge. Supposedly this is a tax that you can get back when you file your foreign tax returns as well, though it is unlikely that most people will do this.

The result of all the new AFIP regulations is that the dolar blue went crazy, jumping from ARS $8.06 on Monday, to ARS $8.25 on Tuesday and then to ARS $8.70 on Wednesday! This is an almost 8% jump in just 2 days – meaning the tax is really only 12%. icon smile Dolar Blue Hits Record Highs After New AFIP Rules

So, how does this all work? I think an example is best…

Let’s say you wanted to buy an airline ticket from Buenos Aires (EZE) to New York City (JFK). You go online and find that American Airlines is selling the ticket for U$S 1200. Now, you could buy that ticket on your non-Argentine credit card and you would pay U$S 1200. Simple.

The benefit comes into play when you buy that ticket with your Argentine credit card or pay in pesos at the American Airlines office in Buenos Aires. They would convert that U$S 1200 ticket to pesos at the official rate – ARS $5.10 * U$S 1200 = ARS $6120. Now, assuming you were getting the pesos you needed to pay 3this at the blue market rate (ARS $8.00) rather than the official rate, you’d be getting that same ticket for only U$S 765 (ARS $6120 / ARS $8.00). Supposedly this was being over-exploited by Uruguayans and Chileans who were coming to Argentina specifically to purchase travel. This is why AFIP imposed the new 20$ fee – to make this less attractive.

Yet, even with the new fee, buying that same ticket would be cheaper in Argentina than paying in dollars. Assume that U$S 1200 ticket has $100 in taxes (which you do not pay the 20% charge on), you’d now have to pay U$S 1420 for the ticket. That would be ARS $7242 at the official rate and U$S 875 at today’s blue market rate of ARS $8.27. That’s still a significant savings off the original U$S 1200 price.

So, what did this regulation actually do? Just made it more expensive for Argentines to travel. If you earn and spend in pesos, the dolar blue has relatively little meaning to you and all of this juts makes like more difficult…

Note: The Xoom rate is currently only at $7.53 as it usually takes them a few days to catch up to major blue market changes.

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