One of the strangest things we experienced our first day in Buenos Aires is the Argentina blue market (i.e. getting pesos on Florida street.) Anywhere else, it would be called "black market" trading, but while exchanging dollars for pesos on the streets is "illegal" in Argentina, it doesn't seem to be frowned upon, in fact it's an important aspect of Argentina's economy.
We had heard from a friend before we arrived that blue market trading was common, but I didn't understand how important it was to Argentinian life until we arrived.
Why Americans benefit from buying pesos on the blue market
In Argentina, dollars can be officially exchanged for about $5.8 Argentina pesos. On the blue market, the exchange rate is $9.6. This is not only a much better rate, but it also offers Americans an opportunity to make money. Theoretically, you could purchase pesos at the cheap rate on the street, then trade them back for dollars at a profit leveraging the official rate. Pretty sweet deal.
We weren't interested in making money on our trip, but we were interested in the best exchange rate, so we were stoked when our host told us she would help us get pesos when we arrived, knowing that she was probably going to take us off the official market.
How do you get pesos on the blue market?
There are a variety of ways to get pesos on the blue market, but the easiest way is to visit Florida street, a popular pedestrian walk way, and super touristy area. There, Portenos post up on walls or benches, saying "cambio" (change) as you walk by. If you see someone who looks honest, and you're interested in trading, you just stop and ask "how much." If you are able to agree to a rate (somewhere between 9.3 and 9.7 when we arrived) you are taken to a back office where you can exchange dollars for pesos.
It sounds shady, but it seems like this is just a part of Argentina life. Some people, like our host, even have a pesos "delivery service," to ensure safe, secure pesos at the best rates. Our host offered this option up to us, but unfortunately, her guy was on vacation.
Since our arrival, we've traded twice (small amounts both times just in case we are scammed) and it has worked out very well so far. While I think it is technically illegal, from what I've heard (and observed) it's almost a joke--and it's something the police turn a blind eye to, probably because they rely on the blue market just as much as everyone else does.
How the blue market impacts the Argentina economy
The blue market is great for people with dollars or euros, but after purchasing our pesos, we wondered, "who's benefitting from this system?"
It seems counter-intuitive when you first think about it. US Dollars are officially worth 6 pesos, yet the black market is selling pesos at a loss. When you think it through, someone buys dollars at the 9.4 rate, then sells the dollars at the 9.6 rate to someone else who sells the dollars for 9.8 . . . with that logic, the person at the top is paying top dollar (ha) to buy everyone else's money. Why?
In Argentina, the inflation rate is at 30%--and growing--and the peso is extremely unstable. While 10 years ago, one peso = one dollar, one peso now = $.15. And according to most of the locals, the value is expected to drop even more, so there is no confidence in the local currency.
Everyone we talked to told us, "I don't save in pesos, they aren't worth anything. I save in dollars."
Here's where it gets tricky. Locals can only get dollars on blue market, there is no other way. Apparently, the government stopped issuing dollars several years back, saying they need the more stable currency to pay their debts to other parts of the world. There are literally ATMs all over the place that say you can get dollars, but no dollars come out.
This explains why our host runs a euro/dollar-based business, and why under-the-table businesses often request to be paid in dollars. It's the only way to get them. And not only do they save dollars when they get the chance, many locals buy dollars at the 10.0 rate, just to make sure they have currency that lasts. The gamble is that an overpriced dollar today, is a fair (or cheap) dollar tomorrow.
The moral ambiguity of the blue market--is it bad for Argentina?
Until we talked to our tour guide and realized that the Argentina people were ultimately the ones dependant on/getting screwed by the system, I thought the blue market was a pretty sweet deal. After today, I am not sure what I think. (One of those times I wish I knew more about economics.)
While it's a huge benefit for me, what happens to the value of Argentina currency if no one wants it? Or if the locals become increasingly poor because their money is worth less?
The economic challenges are some of the main contributors to protests in Argentina, and if the inflation continues, and the economic disparity gets more out of whack, it will only get worse. Hopefully something will be done before it completely cripples the economy, and makes Argentina a more dangerous place to be.