Argentina Takes Steps to Dollarize and Holds Key Rate

[Quilombo]

It's more Kabuki theater IMO, this is just extending what already happens with real estate, cars, and some electronics to the entire economy, and making it legal. Remember, there is still the cepo, and it's impossible for the majority of Argentines to buy dollars from their bank, they must access dollars via the MEP/CCL, so even if retailers wanted to shift towards offering a 2.25L of Coke for $2 at Carrefour it's not feasible still for the overwhelming majority of consumers.

I hate to be a broken record on this, but the amount of dollars "under the mattress" is not evenly divided amongst Argentines, and whether it's Milei or this forum talking about "dollarization" without the BCRA's intervention it's going to be incredibly lopsided towards the rich, who have already been living dollarized lives since Cristina. Seriously, I encourage people to visit Zona Sur or Lat Matanza and talk about dollarization, people barely have pesos let alone dollars... Sure, the members of this forum, people in Palermo, Recoleta, Puerto Madero, countries in the conurbano, soy exporters in the country side, and folks working IT or in tourist hubs like Bariloche or Calafate have dollars, but the average schmuck earning 500-600K a month doesn't unless they've managed to buy some from a cave, and that's to buy a new phone or an apartment one day, not to pay for groceries at Carrefour.

Again, willing to admit if I'm wrong, but this is just more theater. Until I can walk in to my Galicia branch and get dollars on demand for pesos (something I could do under Macri) 2015 was closer to dollarization than 2025 is.

 

[ArgentinaVet]

It's more Kabuki theater IMO, this is just extending what already happens with real estate, cars, and some electronics to the entire economy, and making it legal. Remember, there is still the cepo, and it's impossible for the majority of Argentines to buy dollars from their bank, they must access dollars via the MEP/CCL, so even if retailers wanted to shift towards offering a 2.25L of Coke for $2 at Carrefour it's not feasible still for the overwhelming majority of consumers.

I hate to be a broken record on this, but the amount of dollars "under the mattress" is not evenly divided amongst Argentines, and whether it's Milei or this forum talking about "dollarization" without the BCRA's intervention it's going to be incredibly lopsided towards the rich, who have already been living dollarized lives since Cristina. Seriously, I encourage people to visit Zona Sur or Lat Matanza and talk about dollarization, people barely have pesos let alone dollars... Sure, the members of this forum, people in Palermo, Recoleta, Puerto Madero, countries in the conurbano, soy exporters in the country side, and folks working IT or in tourist hubs like Bariloche or Calafate have dollars, but the average schmuck earning 500-600K a month doesn't unless they've managed to buy some from a cave, and that's to buy a new phone or an apartment one day, not to pay for groceries at Carrefour.

Again, willing to admit if I'm wrong, but this is just more theater. Until I can walk in to my Galicia branch and get dollars on demand for pesos (something I could do under Macri) 2015 was closer to dollarization than 2025 is.

Anyone with a bank account and online access via phone app or banks website can buy as many dollars as they want at the "dolar MEP" rate and withdraw them from their USD account in cash if they so choose. Yes, the rate is currently 10% or so higher than the MULC rate and the dollars come from the securities market and not the BCRA's reserves.

 

[Vossos]

It's more Kabuki theater IMO, this is just extending what already happens with real estate, cars, and some electronics to the entire economy, and making it legal. Remember, there is still the cepo, and it's impossible for the majority of Argentines to buy dollars from their bank, they must access dollars via the MEP/CCL, so even if retailers wanted to shift towards offering a 2.25L of Coke for $2 at Carrefour it's not feasible still for the overwhelming majority of consumers.

I hate to be a broken record on this, but the amount of dollars "under the mattress" is not evenly divided amongst Argentines, and whether it's Milei or this forum talking about "dollarization" without the BCRA's intervention it's going to be incredibly lopsided towards the rich, who have already been living dollarized lives since Cristina. Seriously, I encourage people to visit Zona Sur or Lat Matanza and talk about dollarization, people barely have pesos let alone dollars... Sure, the members of this forum, people in Palermo, Recoleta, Puerto Madero, countries in the conurbano, soy exporters in the country side, and folks working IT or in tourist hubs like Bariloche or Calafate have dollars, but the average schmuck earning 500-600K a month doesn't unless they've managed to buy some from a cave, and that's to buy a new phone or an apartment one day, not to pay for groceries at Carrefour.

Again, willing to admit if I'm wrong, but this is just more theater. Until I can walk in to my Galicia branch and get dollars on demand for pesos (something I could do under Macri) 2015 was closer to dollarization than 2025 is.

I’d be interested to see statistics on “under the mattress” dollars for Milei’s tenure. Is there any benefit these days in holding dollars?

 

[Ries]

I’d be interested to see statistics on “under the mattress” dollars for Milei’s tenure. Is there any benefit these days in holding dollars?

Obviously nobody declares it, so no firm numbers exist, general consensus is after $ 32 billion ( not all in cash) was taken in by milei from his tax holiday, there remains a bit over $200 Billion in big head hundred dollar bills hidden away in Argentina. He doesnt really have a current plan, beyond making things more expensive, to pesoize that hoard.

 

[paulo]

Hope but not expecting this will bring benefits to others besides bitcoin bros and other true believers. Meanwhile, why do stores add to the price if you use a (US) credit or debit card? Is there a set amount they add and do they all do this (if so, they dont all mention it..

Back in Philadelphia some merchants do this when you pay with a card but add a relatively modest increase. Others have minimum bills of sale for using a card.

Also, regarding bank fees here in BA, where I've been for 3 days, I have so far avoided ATMs because it sounds like they will take out 10 dollars for every withdrawal. At one place it was 13 dollars. Will probably go the WU route unless I get clarification from my bank that they will pay all bank fees.

 

[jorisw]

> why do stores add to the price if you use a (US) credit or debit card

I believe it's the other way around where you often get a 10-15% discount if you pay cash. Maybe the prices you see listed are cash prices, leading to a surprise premium when paying with plastic. I've had instances where they'd tell me "ok but you'll pay 15% extra" when wanting to pay with plastic. But usually a cash discount is mentioned instead of a premium on plastic.

Could be several reasons for the cash discount, one being tax evasion, the other being them able to spend the same money quicker elsewhere instead of having money stuck in a bank while the currency fluctuates in value (meaning cash being less risky or less or a hassle to them, could be worth a discount). Though better informed forum members maybe be able to offer better explanations.

What you're describing in the US, I think is just credit card transaction fees being charged to the customers by some merchants.

 

[daveholman]

> why do stores add to the price if you use a (US) credit or debit card

I believe it's the other way around where you often get a 10-15% discount if you pay cash. Maybe the prices you see listed are cash prices, leading to a surprise premium when paying with plastic. I've had instances where they'd tell me "ok but you'll pay 15% extra" when wanting to pay with plastic. But usually a cash discount is mentioned instead of a premium on plastic.

Could be several reasons for the cash discount, one being tax evasion, the other being them able to spend the same money quicker elsewhere instead of having money stuck in a bank while the currency fluctuates in value (meaning cash being less risky or less or a hassle to them, could be worth a discount). Though better informed forum members maybe be able to offer better explanations.

What you're describing in the US, I think is just credit card transaction fees being charged to the customers by some merchants.

The discount for cash lets savvy retailers play the forex game by either holding or immediately exchanging dollars, depending on whether they think it's going up or down.

 

[redlobster]

The discount for cash lets savvy retailers play the forex game by either holding or immediately exchanging dollars, depending on whether they think it's going up or down.

If they can reliably predict exchange rate movements, they should stop doing retail business and become full-time Forex traders.

 

[jorisw]

> The discount for cash lets savvy retailers play the forex game by either holding or immediately exchanging dollars, depending on whether they think it's going up or down.

We’re talking about paying pesos in cash though.