They can legally demand payment in foreign currency since you are here as a tourist (no one does, but there was an edict to this effect from the central bank when fabregas (no, not that one!) was in charge last year.
That must be at the exchange rate.
Tell them what they are asking you to do, pay in dollars (you are not a US citizen) and at an illegal exchange rate is enough to cause them serious legal problems. If a bank offered you this exchange rate for example (14 to 1) they could lose their license to trade in the country.
Refuse, tell them you'll pay with your UK credit card (try not to) or in pesos at the official rate.