Wednesday, September 5, 2012

Palermo Pot-Banging

For the time being, I’m stuck in California, but my wife arrived in Buenos Aires Saturday for a family visit combined with vacation. Returning from dinner with friends at the Museo Evita restaurant Monday night, she was startled by a cacophony of metallic noises seemingly emanating from all the balconies and open windows in our normally placid Palermo neighborhood (pictured above and below), a middle to upper middle-class area near the botanical gardens and the zoo. The heavy metal sounds were not musical - rather, a cacerolazo (pot-banging demonstration) had erupted against President Cristina Fernández de Kirchner.
The whys were not totally clear. Palermo is definitely hostile territory toward the president and her Peronist populism, at least since the late 1940s when Evita opened a home for unwed mothers in the expropriated mansion that is now the museum (it's deliciously ironic that it now houses one of the capital's elite restaurants). The initial explanation was irritation with the so-called cepo cambiario, the “currency clamp” that makes purchasing dollars or other foreign money for trips abroad (even including neighboring Uruguay) a bureaucratic nightmare. For an hour and five minutes, Cristina used the so-called cadena nacional (a relatively brief takeover of every TV channel in the country) to explain the currency restrictions and industrial policy.

In reality, it wasn’t quite so simple. The city daily Clarín, editorially critical of the president and her government, reported that some indignant protestors were simply upset with the pre-emption of prime-time programming. Others worried that the president’s supporters would seek to change the constitution to allow her to seek a third term, though the next presidential election will not take place until 2015. Her popularity is plunging, but in a country with an impossibly divided opposition it would be foolish to rule that out.

What does this mean to foreign visitors? Well, none of these middle-class demonstrations is likely to turn violent, but I always caution non-Argentines not to get caught in the middle of something unless they really know their way around. Curious observers should stay on the margins.
For several days last week, we hosted friends from Tierra del Fuego who were on a month-long California road trip fleeing a cold, wet winter in the uttermost part of the earth (pictured above in summer). Javier Jury, who operates Ushuaia’s Martin Fierro B&B, phoned me yesterday before flying back to Buenos Aires from Los Angeles. He’s fortunate enough to receive dollars and euros directly, so getting foreign currency to travel isn’t a big issue, though he still uses his Argentine credit card here. He hadn’t been following the news, though, and he didn’t know that the government has now decided to tack a 15 percent surcharge on all foreign purchases to go directly to AFIP, Argentina’s equivalent of the IRS. In theory, at least, this could mean paying Argentine sales tax on a meal in Los Angeles, London or Paris. When the bill arrives, Javier’s holiday may be substantially more expensive than he expected.

Obviously, that doesn’t affect foreign travelers to Argentina directly, but in reality it’s a de facto devaluation of the peso. In details, it’s complicated but, until now, Argentines have been able to make overseas purchases at the official rate of 4.60 pesos to the dollar; the surcharge makes that roughly 5.30 pesos to the dollar. Given the lack of confidence in the government and the self-defeating complexity of its monetary policy, at some point this exchange rate improvisation is likely to break down.

In fact, Argentina has not just one but multiple exchange rates, ranging from three pesos for the “soy dollar” to 6.50 pesos for the “stock market dollar.” In yesterday’s La Nación, economist Nicolás Livinoff explains nine different de facto exchange rates that operate in Argentina, while Clarín’s iEco section posits a dozen of them.

I don’t have time to go through all of them, but those with better than basic Spanish should be able to get the gist by following the links. Still, such policy improvisation is clearly unsustainable in the long run, so keep an eye on this space for further updates.

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