Due to skyrocketing inflation, Argentines are constantly trying to exchange their weak pesos for strong dollars as quickly as possible. The entire country is groaning under the devaluation of money. Will the new president, who will be elected on Sunday, turn off the money printing press? So what?
Joost de VriesNovember 19, 2023, 5:00 am
Gustavo (37, cap, shorts) unzips a large backpack and takes out six hundred bills: four hundred of 1,000 Argentine pesos, two hundred of 500. Sofía López Mañan (41, big head of curls) hands him five $100 bills.
He is one of countless Buenos Aires money changers who earn a good income from the ‘spread’, the margin between the buying and selling price of US dollars. She is a freelance photographer and, like every adult Argentinian, a seasoned currency speculator.
In a country struggling with chronic inflation, the clandestine trade in US dollars is a completely entrenched practice. During this tense election year, inflation already rose to 143 percent on an annual basis. Every month, products become on average 12 percent more expensive. The peso notes therefore evaporate in your pocket (or backpack), unless you exchange them for a coin or good that retains its value.
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Joost de Vries is Latin America correspondent for de Volkskrant. He lives in Mexico City. De Vries previously worked in the economic and political editorial team.
Just as speculators worldwide flee to the dollar or the euro when they risk losing their investments in emerging economies, the Argentinians are also clinging to the dollar. Their own peso is like a hot potato that they cannot ignore – they get paid their salary in pesos, buy their groceries with it and pay their rent with it. But they prefer to pass on their pesos as quickly as possible.
This way they can go to well-built types like Gustavo or in the informal ‘cuevas’, illegal exchange offices known as caves. Because Gustavo’s work is strictly speaking prohibited, he does not want his surname in the newspaper. Within the guild of money changers, he belongs to the subcategory of home deliverers. This morning he parked his van in front of López Mañan’s home.
The transaction takes place in the living room while enjoying a bitter Argentinian mate tea. “I used to want to be a footballer,” Gustavo laughs. His customer needs pesos because one of her cameras needs to go to the repairman. “They predict that the price will rise further after the weekend,” says the money courier. López Mañan heard it too. In a few days she might be able to get even more pesos for her dollars, but the repairs can’t wait any longer.
Presidential elections
This daily trading game has been around for decades, but the stakes have never been as high as in 2023. An uncertain political situation pushed up prices and rates. This Sunday, Argentina will elect a new president to succeed left-wing Alberto Fernández. Polls predict a neck-and-neck race between two complete opposites.
On the ballot paper is on the one hand Sergio Massa, the economy minister of the current left-wing populist ‘Peronist’ government, who is regarded as relatively right-wing, and on the other hand the ultra-right economist Javier Milei, an anti-politician who roars promising to put an end to the left-wing bluster. welfare state. The libertarian campaigned with a chainsaw, which symbolizes the knife he wants to put into spending.
Money changer Gustavo and Sofía López Mañan. Image Irina Werning for de Volkskrant
This ‘quilombo’ (an Argentinian term that can mean both a complex situation and total chaos) has a direct impact on the already turbulent economy. Inflation this year reached levels not seen by Argentines since the hyperinflation of the early 1990s. And the ‘black’ dollar, known in Argentina as the ‘dólar blue’, has never been so expensive.
The presidential candidates Javier Milei (left) and Sergio Massa. Image AFP
During the campaign, minister and presidential candidate Massa distributed extra money to pensioners and the unemployed. At the same time, Houwdegen Milei compared the Argentine currency to feces. The informal dollar shot from 500 to 1,000 pesos within a few months.
Basic groceries therefore cost thousands of pesos, the same for a few American dollars. The number of Argentines living below the poverty line rose to 40 percent this year. People belonging to the shrinking middle class are involved in a daily race with inflation to avoid falling below the subsistence level.
Meat for Christmas
Photographer López Mañan and her boyfriend are lucky that their house is family property, she says. Some friends could no longer keep up with inflation and were evicted from their rental property. This unequal competition requires unprecedented flexibility. ‘We are all constantly calculating.’ Argentinians look at the exchange rate of ‘el blue’ more often than at the weather forecast. Because although apparently safer than the peso, the value of the dollar can also fluctuate several percentage points per day.
“We buy bulk goods at the supermarket,” says López Mañan. ‘Rice, pasta, oil, toilet paper. A friend recently bought thirty bottles of shampoo.’ The mother of money changer Gustavo asked him to freeze a large piece of meat for Christmas dinner. López Mañan: ‘We are constantly looking for ways to spend our money as quickly as possible. Tourists are wondering about the crisis, because all restaurants are full.’
That hurried, uncertain life made Argentinians not only exceptionally inventive, but also deeply dissatisfied. “People are furious.” Behold the success of the swearing and ranting political newcomer Milei. The eccentric economist with the wild hair and fire-breathing eyes filled event halls with thousands of young people last year with his angry performances. He rages furiously against the incumbent ‘political caste’, which could only fill the gap in its own hands by printing billions of pesos.
The culprits in his argument are the ‘Peronists’, the political heirs of former president Juan Perón (1946-1955 and 1973-1974). Left-populist Peronism has been a dominant trend in Argentine politics for three quarters of a century, albeit in various reincarnations. Of the last four presidents, three were Peronists. Milei portrays them as corrupt politicians who have made a rich country poor through profiteering and clientelism.
On the streets, like here in Buenos Aires, there has been more and more trading since the hyperinflation in the country.Image Irina Werning for de Volkskrant
He not only promises to deal with the incumbent power, but also offers a panacea for the future: a shock therapy that should revive the patient Argentina by force. If he becomes president, he will cut government spending, cut benefits, abolish many ministries, leave the market completely free, close the central bank and replace the peso with the dollar. Because to eradicate inflation, he says, the rampant spending of pesos must end.
Steaming money press
Milei’s analysis is correct, responds Argentinian economist Miguel Boggiano, educated at the liberal American University of Chicago. The Argentinians owe their inflation to their own money press, he says by telephone. “Alberto Fernández’s government printed money worth 20 percent of gross domestic product in recent years.” At the same rate that the notes rolled off the press, they lost their value.
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In a stately street in the popular Palermo district, ‘Maxi’ (51, bald, glasses, Professor Barabas beard) runs a small exchange office. His business has no name on the facade. If you don’t know it, you’ll pass it by. In the waiting room, people draw a number to buy pesos or dollars in one of the three closed booths. “We are a necessary evil,” says Maxi. ‘Everyone needs us.’ He also counts police officers and judges among his clientele.
Like Milei, he holds the Peronists responsible for the Argentine malaise. They put the country deeply in debt and then spent the money poorly, he believes. “Instead of building ports, roads and infrastructure, we gave it all away through social programs.” He sees a break with the existing collective spending pattern as inevitable. “We’re all going to have to be in pain, grit our teeth and move forward.”
Fear among the poorest in the country
But that is exactly the fear of, according to polls, about half the population. Many of them voted for government candidate Massa during the first voting round on October 22 (then with five candidates), fearing that Milei’s chainsaw will not only affect the government, but also them. At least 20 million of the 46 million Argentines receive some form of state aid. The subsidies are safe with him, Massa reassured. He received 37 percent of the votes in the first round.
A Milei government will hit the poorest hardest, more than a hundred international economists also said last week. The concerned academics signed an urgent letter, which was co-written by the left-wing French economist Thomas Piketty. Milei’s ‘quick fixes’ will further harm Argentina’s economy, the letter stated. “Unregulated markets are not benign, they reinforce inequality.”
But maybe the steaming soup that Milei has served so far won’t be eaten so hot after all. His outstretched leg earned him 30 percent of the votes in the first round a month ago, not nearly enough. Since then he has already moved to the middle in the battle with Massa. For example, he said in a recent debate: ‘We do not alter existing rights.’
And what about the dolarización, his rival asked, did he come back to that? No, Milei responded fiercely as usual: “We will introduce the dollar, we will close the central bank, we will eradicate the cancer of inflation.”
In photographer López Mañan’s apartment, cash courier Gustavo zips up his bag. He also has little sympathy for the Peronists, he admits before he walks out the door. Yet he does not yet know who he will vote for. ‘If Milei wins, I will lose my job.’
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