Where's the Money? Exchange Rate Update

Argentine President Cristina Fernández managed an impressive re-election victory on Sunday, October 23, but her honeymoon could be short. Almost immediately after the election, confident with a nearly 40-point margin over the closest challenger, her government instituted new foreign exchange rules intended to reduce capital flight or, as her current economy minister/vice-president-elect Amado Boudou described it, “money laundering.”

No matter what one might call it, Argentines have been betting on the dollar for decades – only during the 1990s, when the peso was at par with the US currency, did the demand drop. But it’s not a stereotypical issue of smuggling money across borders – in reality, neither the business sector nor middle-class Argentines have much confidence in the populist government’s economy policies. Its notorious manipulation of inflation statistics is one symptom, and many people view the dollar as a hedge against a potential devaluation.


In reality, the purchase of dollars through legal means has forced the government to put is own currency reserves onto the market, to avoid a precipitous decline in the peso (currently at an official rate of 4.20 to the dollar, it trades at 5.10 on some informal markets). Yesterday, according to the English-language Buenos Aires Herald, the new bureaucratic controls brought foreign exchange transactions to a virtual standstill.

What does this mean for visitors to Argentina? In the short run, very little – my wife is presently in Buenos Aires, and she reports no difficulty in acquiring pesos from local ATMs. Until now, however, it’s been possible to obtain either pesos or dollars from many ATMs, and that’s no longer true (for all Boudou's blathering, it's hard to imagine big-time money launderers abusing the ATM option by withdrawing the maximum US$250 per day). And those who need to turn pesos back into dollars at the end of their holidays may find it more difficult than it once was.

It wouldn’t surprise me if, sooner or later, the government instituted multiple exchange rates that would encourage people to bypass official channels entirely – making backroom exchanges to get their dollars. That would be highly prejudicial to the travel and tourism sector, as services would be higher at official prices than they would be for those using the so-called “parallel market,” an Argentine euphemism.

Meanwhile, the situation is toughest for Argentines presently traveling abroad – many have suddenly found that they can no longer purchase dollars or other foreign currencies in North America, Europe, or elsewhere in the world. Unless they’re carrying large amounts cash, or have an overseas bank account, their only alternatives are credit cards.

Moon Handbooks Patagonia on the Road

Continuing this week, my promotion tour for the new third edition of Moon Handbooks Patagonia will approach its end in a series of digital slide presentations on southernmost South America. In addition to covering the capitals of Buenos Aires and Santiago, the gateway cities to Patagonia, I will offer a visual tour of the Chilean and Argentine lakes districts, Argentina's wildlife-rich coastline and Chile's forested fjords, the magnificent Andean peaks of the Fitz Roy range and Torres del Paine, and the uttermost part of the Earth in Tierra del Fuego. I will also include the Falkland Islands, with their abundant sub-Antarctic wildlife.

Tonight, at 7 p.m., I will be at REI Fremont, 43962 Fremont Blvd., Fremont, CA 94538, tel. 510/651-0305. The season’s last event will take place Thursday November 3, at 7 p.m., at the Lafayette Library, 3941 Mt. Diablo Blvd., Lafayette, CA 94549, tel. 510/385-2280. Under the auspices of the World Affairs Council East Bay Chapter, this is the only event that will charge admission - $15 for WAC members, $17 for all others. Doors open at 6:30 p.m. for a wine tasting and tango demonstration, both included in the admission charge.

For those planning trips to the south, there be will be ample time for questions and answers. Books, including my other titles on Argentina, Chile and Buenos Aires, will be on sale at all events.