I just traveled to Argentina — and doubled my money with a ‘black market’ exchange rate

There are two foremost drivers: While the broader world has change into increasingly cashless, money is king in Argentina. Hyperinflation has additionally distorted the nation’s foreign money market and led to the creation of a number of exchange charges.

When I visited in February, the “official” exchange rate — the one quoted by on-line currency calculators — gave U.S. vacationers about 190 Argentine pesos per greenback. But the unofficial, “blue dollar” rate was practically double that.

Put one other manner: Your money goes virtually twice as far with the “blue dollar” exchange rate. This rate is ready by underground exchange homes working on the black market. Western Union is a authorized workaround to get a related rate.

You will not get the higher conversion when transacting at an airport counter and, relying on the scenario, might not when withdrawing from an ATM or utilizing a bank card.

I realized this the onerous manner, solely discovering how to get the higher rate after exchanging $150 on the airport — and getting about half the pesos I in any other case might have.

Hence my journey to Western Union a day later, the place, after watching a brief video on the way it works, I exchanged $350 for about 128,000 Argentine pesos on Feb. 13 — a rate of 366 pesos per greenback.

These twin charges aren’t a new phenomenon in Argentina, or Latin America extra broadly, economists later instructed me. But for me — a first-timer to South America who was unaware of this method— navigating them was curious and extraordinary.

“If you go back 40 years, you’d find multiple exchange rates in Argentina,” mentioned Monica de Bolle, senior fellow on the Peterson Institute for International Economics and a professor of Latin American research at Johns Hopkins University. “It’s just something that keeps coming back.”

In 2022, the nation’s inflation rate hit 95%, a three-decade excessive and among the many most rapid on the planet. For perspective, pandemic-era inflation within the U.S. peaked at about 9% — or a tempo 10 occasions slower.

Argentina is now again in hyperinflation territory, de Bolle mentioned. At the present tempo, Argentines’ money loses about half its worth in a yr, which decimates financial savings held in pesos.

As a end result, Argentines search out a steady foreign money for his or her financial savings so it would not lose worth nearly in a single day. And the U.S. greenback is that most well-liked retailer of worth.

The authorities, nonetheless, imposes overseas foreign money controls on residents, who’re restricted from buying greater than $200 a month (in U.S. {dollars}) through a financial institution.

Anyone who desires to save extra cash in U.S. {dollars} should flip to the black market, which units the “blue dollar” exchange rate.

The “blue dollar” rate is the one acquired when shopping for and promoting a bodily greenback at a “cueva” — Spanish for “cave” — which is mainly a clandestine exchange home. Some are readily marketed by individuals on the road yelling “cambio,” which suggests “exchange” in Spanish.

“It’s going to be some random office in a building and every Argentinian who has any money at all does this a few times a week,” Devon Zuegel, a writer and software program engineer who lives a part of the yr in Argentina, mentioned on a current economics podcast.

Ultimately, the exchange charges are a story of provide and demand amongst Argentines, mentioned Jonathan Petersen, a senior markets economist and overseas exchange specialist at Capital Economics.

The black market rate displays the worth residents place on stability. The peso premium they’re paying for U.S. {dollars} relative to the official exchange is the tough equal of a yr’s price of current inflation, Petersen mentioned — virtually a no-brainer for any native intent on saving for the long run.

“Every day, every week, every month, the peso will buy you less and less,” Petersen mentioned. “I think the fact that there’s more than one exchange rate is the symptom of this monetary mayhem.”

While these cuevas (the personal exchange homes) are technically unlawful, the federal government largely appears to flip a blind eye. A giant chunk of Argentina’s nationwide debt is denominated in U.S. {dollars}, that means that, in easy phrases, the federal government wants a fixed move of {dollars} to have the opportunity to pay its debt, de Bolle mentioned.

What’s extra, a extra favorable exchange rate attracts American vacationers, who carry their U.S. {dollars} into the nation, with the additional benefit of spending regionally and supporting the economic system, she mentioned.

They concern one other “corralito,” or a “little corral,” a interval within the nation’s historical past when the federal government seized deposits throughout financial crises.

In 1982 and 1989, for instance, it froze financial institution deposits and confiscated financial savings to finance operations and pay debt. In 2001, the federal government restricted entry to deposits. The freeze lasted a yr; when prospects regained entry to funds, they found their greenback deposits has been transformed to pesos, which had depreciated considerably in worth.

So, many Argentines like dealing in money and stashing it away from banks, consultants mentioned. Sometimes, that influences conduct which may appear unusual to a foreigner. For instance, some lower-earning Argentines use a part of their paychecks to purchase a pallet of bricks; they will construct a home brick by brick, which they view as a higher retailer of wealth than holding on to pesos, Zuegel mentioned.

For vacationers, this mistrust of economic establishments is essential to know as a result of many retailers might not settle for bank cards as a end result — that means guests ought to count on to want some money for his or her purchases.

“Travelers from the U.S., Canada and Europe are incredibly accustomed to flipping out their debt card and tapping the credit card charge machine,” mentioned Jed Rothenberg, director of LandingPadBA, a journey company centered on Buenos Aires. “You come to Argentina and it’s the complete opposite.”

“You’re in a very cash-friendly environment,” Rothenberg mentioned. “Cash-demanding, in fact.”

Here’s how the process works, in easy phrases: Americans ahead money to themselves on-line — through a checking account, debit or bank card — and go for pickup at a Western Union department in Argentina. The money is then acquired in Argentine pesos.

The exchange rate provided by Western Union has been related to that of the “blue dollar” rate on the black market. Acquiring money this manner is authorized.

A Western Union spokesperson was unavailable to remark by press time on how the corporate is in a position to provide an equal exchange rate.

Visitors ought to concentrate on potential snags: Lines and wait occasions could be lengthy — even a few hours, locals instructed me — relying on the department and time of day. It additionally might take a few days to entry funds as soon as despatched, relying on supply methodology. And sure branches might impose a greenback restrict per transaction and there’ll possible be transaction charges. You’ll additionally want to present your passport for pickup.

Some vacationers additionally go to cuevas. While not authorized, they largely function in plain view and usually provide the very best exchange charges — and, as said earlier, are just like the nation’s worst-kept secret.

Tourists who go for this route could also be greatest served by asking their lodge, Airbnb host, tour operator or different trusted confidant for a suggestion on the place to go, consultants mentioned. Tourists usually get the very best exchange charges with crisp $100 payments; it might be more durable to transact with worn-out or smaller payments.

I accompanied a buddy to a cueva in El Calafate, a Patagonian city within the southwest that serves as a gateway to Glaciar Perito Moreno in Parque Nacional Los Glaciares. The cueva, really useful by our tour information, was tucked away on the second ground of an upscale steakhouse, in a facet room the place a lone lady diligently traded payments from behind a fold-out desk.  

However, “the black market has risk,” cautions Sandra Borello, president of Borello Travel & Tours, a tour operator that focuses on journey to South America.

Aside from it being unlawful, there’s a probability vacationers might get pesos which are faux or out of circulation, for instance, she mentioned. It may additionally make some vacationers uneasy to carry a whole bunch of {dollars} in money on them.

“I wouldn’t recommend that at all,” Borello, who’s from Argentina, mentioned of the cuevas.

The exchange rate at a cueva additionally is not a lot better than at a Western Union, and possible would not make a lot of a monetary distinction for somebody visiting the nation for a week or two, Borello mentioned.

When she travels to Argentina, Borello pre-buys as a lot as doable — whether or not excursions, inns or in any other case — to keep away from needing an excessive amount of money on the bottom. For every little thing else, eating places and different retailers are usually receptive to accepting U.S. {dollars} as cost in lieu of pesos, and usually give prospects a good exchange rate, she mentioned. Ask in the event you pays with U.S. {dollars}, what the dollar-equivalent value will likely be, and what (if any) change you may get in pesos, she mentioned. (Bear in thoughts: The service provider might not converse English. And, as with the cuevas, crisp payments are greatest.)

In addition, e book an airport switch forward of time to keep away from needing money straight away, she really useful.

Further, Argentina’s central financial institution launched a preferential exchange rate — the Dólar MEP — for vacationers in November. Known because the “foreign tourist dollar,” the MEP applies to bank card transactions. It’s at present solely available for Visa and Mastercard purchases.

As of March 9, Dólar MEP was buying and selling at 376 Argentine pesos per greenback, on par with the black market rate. The “official” rate was 200 pesos per greenback.

Aside from attempting to enhance tourism, the federal government possible sanctioned the preferential rate partly as a manner to assist enhance transparency into enterprise’ revenues — which is more durable with all-cash transactions — and thereby enhance tax assortment, economists mentioned.

“To have a foreign-issued credit card give you a rate closer to the blue, we’ve been waiting for this for years,” Rothenberg mentioned.

However, taxis do not settle for bank cards, and many different retailers might not. You’ll additionally want money for restaurant ideas. Credit card transactions additionally usually come with steep charges that may run customers a further 15% to 25%, although it is at retailers’ discretion, Borello mentioned.

As with all worldwide journey, bank card customers can be properly served to contemplate a card without foreign transaction fees, too.

It’s considerably unclear as to whether or not vacationers are getting the preferential Dólar MEP rate for ATM money withdrawals. Locals provided conflicting stories. A Visa spokesperson confirmed ATM withdrawals would get the higher exchange rate. A Mastercard spokesperson did not reply to a request for remark.

The money scenario is dynamic and guidelines might change rapidly, journey consultants mentioned.