Currency Arbitrage

[wjacobs]

I can't help but notice the enormous spread between the official and unofficial exchange rates. Even after the 30% tax and various commissions paid to change currency, it looks like it's about a 20% gain each time you turn dollars into pesos and then back into dollars.

I imagine it looking something like this:
1. Send a dollar to Argentina via Western Union; get 110-115 ARS
2. Buy something in the US with my Argentina debit card, such as groceries, Amazon gift card, gold. Could maybe even have Western Union charge my card and send the money back to Argentina once again. After tax it costs about 92 pesos to buy a dollar worth of stuff.

I have tried this on a small scale and can confirm it works.

Is this legal? Any other risks to be aware of?

 

[dsp27]

I can't help but notice the enormous spread between the official and unofficial exchange rates. Even after the 30% tax and various commissions paid to change currency, it looks like it's about a 20% gain each time you turn dollars into pesos and then back into dollars.

I imagine it looking something like this:
1. Send a dollar to Argentina via Western Union; get 110-115 ARS
2. Buy something in the US with my Argentina debit card, such as groceries, Amazon gift card, gold. Could maybe even have Western Union charge my card and send the money back to Argentina once again. After tax it costs about 92 pesos to buy a dollar worth of stuff.

I have tried this on a small scale and can confirm it works.

Is this legal? Any other risks to be aware of?

Sure you can do it. What you describe is not exactly arbitrage though. It's buying lower and selling higher comparable assets. No you cannot have "Western Union charge your card" because they won't accept your ARG issued card as a funding method to send the money back to Argentine, nor can you use an ATM to extract more than 50 USD.

So yes, you could use your ARG debit card in the US and get a "discount" of about 25% on your purchases subjects to whatever limits your Bank may impose. BUT what you spend needs to be on goods/services. The only other way to actually do an arbitrage would be to purchase Visa gift cards online in the US) and then liquidate those at Walmart (in the US) by buying a money order and depositing it into your US bank account. This is technically legal (it's called manufactured spending) but it does involve more fees and might trigger your account to be flagged for money laundering.

So to sum up yes, "limited arbitrage" is possible and there is a premium of about 25% (currently).