TheDonald
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- Nov 22, 2018
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A small arbitrage window has opened.
I went to my cueva and changed dollars for pesos at 76.
I took those pesos to an airline ticket office on Avenida Santa Fe. I paid for my airline ticket in pesos at an effective rate of roughly 67. After netting out my opportunity cost of the 2% cash back credit card rewards, my effective rate for this airline ticket was roughly 68. In other words, I paid about $890 for a flight that was quoted in dollars at $1.010. This represents a discount of about 12%.
Economically speaking, this makes perfect sense. My dollars were placed into the Argentine economy via the cueva. The resultant pesos were then deposited in the airlines' bank account in Argentina. The airline is subject to the stringent capital controls we all have read about. So the airline can't change those pesos into dollars and bring them home - they just sit in the Argentine bank account.
While this discrepancy benefits Argentina, I imagine the airlines will close the price gap sometime soon. They would prefer foreigners pay with their foreign credit cards and conversely, don't want pesos piling up in Argentina.
I went to my cueva and changed dollars for pesos at 76.
I took those pesos to an airline ticket office on Avenida Santa Fe. I paid for my airline ticket in pesos at an effective rate of roughly 67. After netting out my opportunity cost of the 2% cash back credit card rewards, my effective rate for this airline ticket was roughly 68. In other words, I paid about $890 for a flight that was quoted in dollars at $1.010. This represents a discount of about 12%.
Economically speaking, this makes perfect sense. My dollars were placed into the Argentine economy via the cueva. The resultant pesos were then deposited in the airlines' bank account in Argentina. The airline is subject to the stringent capital controls we all have read about. So the airline can't change those pesos into dollars and bring them home - they just sit in the Argentine bank account.
While this discrepancy benefits Argentina, I imagine the airlines will close the price gap sometime soon. They would prefer foreigners pay with their foreign credit cards and conversely, don't want pesos piling up in Argentina.
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