Economy

Infographic: The Peso’s ever-growing list of exchange rates

19th December 2019

By The Essential Staff

Infographic: The Peso’s ever-growing list of exchange rates

With the reforms likely to be passed in Congress this week, the Argentine peso’s already quite diverse landscape of multiple exchange rates will get even more complex.

Starting with the re-introduction of most export duties in 2018 and continuing with the return of the “clamp” against free currency purchases that led to the re-appearance of black and grey markets, the easy reference of the official peso-to-the-dollar exchange rate has been replaced by a multitude of figures, depending on how the currency exchange is made, while the gap between the official and grey-market rates has also been getting wider. Below is a graph picturing the appearance and evolution of these rates over the last year.

</p> <img class="wp-image-6256 aligncenter" src="https://gettheessential.com/wp-content/uploads/2019/12/rates-300x195.jpg" alt="Argentina's multiple exchange rates over 2019" width="760" height="494" srcset="https://gettheessential.com/wp-content/uploads/2019/12/rates-300x195.jpg 300w, https://gettheessential.com/wp-content/uploads/2019/12/rates-1024x666.jpg 1024w, https://gettheessential.com/wp-content/uploads/2019/12/rates-768x499.jpg 768w, https://gettheessential.com/wp-content/uploads/2019/12/rates-1536x998.jpg 1536w, https://gettheessential.com/wp-content/uploads/2019/12/rates-2048x1331.jpg 2048w, https://gettheessential.com/wp-content/uploads/2019/12/rates-600x390.jpg 600w" sizes="(max-width: 760px) 100vw, 760px" /> <p>Up until the debt and currency crisis of 2018, all but a few currency transactions were done through the MULC (<em>Mercado Único y Libre de Cambios</em>, Spanish for Free and Single Currency Exchange) platform, where bid and ask prices from importers, exporters, banks and the Central Bank were posted and eventually paired, freely completing the transactions.</p> <p>There were some exceptions: a minority of transactions were done under the table, for tax evasion or other usually illicit reasons, but the amount was small, as proven by the fact that the price was almost the same in these black markets as in the official MULC. Retailers that purchased dollars from commercial banks also paid a bit more, due to the bank&#8217;s commission, and soy bean exporters had to pay export duties (the only tax on exports that was not eliminated by Mauricio Macri at the beginning of his term in 2015), so in practice this meant that the exchange rate for soy exports was less than for the rest of the country.</p> <p>In 2018, however, Macri re-introduced export duties for a host of other exports, as well as raising the amount paid by those who exported soy, the country&#8217;s main cash crop, meaning most exporters are now getting less pesos per dollar than the official exchange rate states. By August 2019, Macri also severely limited foreign currency purchases, leading to the reappearance of the black and grey currency markets seen during Cristina Fernández de Kirchner&#8217;s presidency.</p> <p>The most financially significant grey market is that of the blue-chip swap, in which a stock that trades in pesos in Argentina and in dollars abroad can be used to bypass these controls, at higher prices. Black markets were also swarmed by everyday Argentines with less access to sophisticated financial tools, looking for an outlet to their excess pesos that now couldn&#8217;t be used to buy dollars at official prices, leading to a surge in price there as well.</p> <p>Now, Alberto Fernández&#8217;s Economy Minister <a href="https://gettheessential.com/economy/2019/12/12/martin-guzman-economy-minister-presentation-debt-money-printing-economic-plan-fiscal-surplus">Martín Guzmán</a> has announced that even the USD 200 per person authorized in foreign currency purchases will pay a 30 percent tax in order to protect the Central Bank&#8217;s reserves while avoiding a continued devaluation. The same tax will apply to purchases abroad via credit or debit card by tourists or through the internet, with only a few <a href="https://www.lanacion.com.ar/economia/dolar-30-cuales-son-productos-estaran-exentos-nid2316501">exceptions</a> such as books, medicine and state expenses.</p> <p>This means that the retail dollar price has de facto jumped from 63 pesos to 81.9, and the official retail price is now only available for those untaxed exceptions. Many Argentines are now likely to switch to the black-market if they want to travel abroad, which has led to a spike in those prices as well, from 65 last week to 73 this Tuesday. In exchange, the Central Bank will see reduced pressure in the wholesale market, which can now be seen as a merely &#8220;commercial&#8221; market for importers and a few untaxed importers. This will protect Argentina&#8217;s currency reserves and slow down a potential new surge in the exchange rate paid by importers, which directly affects inflation.</p> <p>This latest split in retail prices adds a new exchange rate to the already long list. Others exchange rates, such as a variant of the blue-chip swap that uses locally-traded bonds instead of stocks, as well as the so-called &#8220;cable dollar&#8221; used to illegally wire money abroad, are not pictured in the graph.</p> <p>

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The Essential Staff

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