John.St said:
Still much cheaper than the AR$ 2,700 you stand to loose per year from the 18% inflation on a AR$ 15,000 account - and this does not include the risk of a peso devaluation on top of the inflation.
First, John.St, you're double-counting. Either calculate the loss in value from inflation OR the loss in the currency exchange, but not both.
That said, the preferred rates for Plazo Fijos available to Citigold clients more-or-less cover the unofficial inflation rates or the negative changes in exchange rates, whichever you prefer to use. Calculating the USD value of funds since my initial deposit to now, I've earned slightly less than I would have in US bank CDs over the same period.
Plus, using the credit card that comes with this account, I get 15% off at Jumbo every Wednesday, and 10% off on gas, and 10% routinely at Rodo and Falabella. I bought a ton of stuff for a new apartment at special 25 - 35% discounts (with 6-12 interest-free payments).
To maintain my legal resident status, I need to have some sort of bank account into which I can make monthly transfers from abroad. I also need to maintain funds here in any case, for normal living expenses. Otherwise, I'd be paying 2-3% for money transfers, ATM withdrawals, and foreign credit card surcharges - fees that everyone here justifiably complains about. If you spend USD 20.000 a year here, your 3% transaction costs come to A$R 2.310 per year, with no benefits to show for the expenditure, and all the well-known hassles trying to deal with basic expenses and money issues.
RWS said:
More than one Argentine has told me how his Argentine account denominated in dollars was forcibly converted to pesos during the most recent financial crisis. One acquaintance did say that the federal government justified the conversion as a forced loan; but she of course doubted that it would ever be repaid.
This is a story I've heard from many Argentines. Here are the facts as I understand them:
- For a decade, Argentina locked the value of the peso to the dollar, with 1 peso = 1 dollar. It was a stupid policy that backfired, and it was excruciatingly difficult to undo.
- People deposited money to their bank accounts believing that each peso they deposited was worth a US dollar. In reality, the peso equaled the dollar only because of government supports, made possible by loans from foreign governments and international agencies.
- In 2001, a general realization that the peso was increasingly difficult to convert to other currencies caused a run on the banks. People were buying dollars by any means possible, at whatever rate they could get, and they were exporting these dollars abroad, increasing the pressure on the peso.
- To prevent a banking collapse, the government passed emergency measures known as the "corralito" that permitted only limited withdrawals from bank accounts, according to a formula that supposedly accounted for basic living expenses. The measure was based on similar actions in the US in the 1930s that stopped a run on the banks. It also prevented panicked depositors from converting pesos to hard currencies and further driving down the value of the peso.
- Despite these measures, the economy collapsed, and the foreign exchange markets would no longer exchange pesos for dollars. No longer able to buy dollars to meet its foreign obligations and pay for its imports, the government was forced to allow the value of the peso to float according to the market.
- When the peso fell to USD 0.25, it was understandable that people felt the government had given away 3/4 of their money. But the objective reality is that their perception of the value of their money was badly inflated to begin with.
- When the embargo on withdrawals was lifted, the pesos in the account were worth far fewer dollars than when they were deposited. Still, a peso bought a peso's worth of goods, as long as those goods were produced domestically. There were shortages of the now-expensive imported goods whose popularity and low prices were a major cause of the economy's collapse, but essentials were still available at more-or-less the same peso price as before.
The fact is that pesos kept under the mattress would have lost value vs hard currencies in exactly the same manner as those deposited in banks. At least those in banks earned a little interest. As far as I've been able to determine, no one lost any pesos in that crisis.
As for applicability of the 2001-2 debacle to the current situation, I don't think anyone believes the peso is seriously overvalued at the moment. If it were, I suspect that many of the participants of this forum wouldn't be here, since the cost of living in Argentina would be higher than in the EU or the US. The government has deliberately allowed the peso to sink almost 30% in the last year, which has kept it quite competitive. I wouldn't be surprised to see exchange rates go to 4.10 or 4.20, but for the time being, a gross devaluation is extremely unlikely.
So, are bank accounts in Argentina risk-free? Absolute not, mostly because there's no equivalent to FDIC insurance here, and banks might fail. On the other hand, we all have basic banking needs in Argentina, and these are most easily facilitated by Argentine commercial banks. For me the question is one of balancing risks and benefits.
In that context, I'm content with my banking arrangement with CitiGold Argentina.