In Argentina, controls spawn soy and “Netflix” exchange rates

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BUENOS AIRES — Jose Zegarra, a Peruvian tourist in Argentina’s capital Buenos Aires, has found out the hard way that the value of the country’s peso isn’t always what it seems, as strict capital controls result in a range of rates extremely divergent exchange rates.

Charged almost the official 150 pesos per US dollar when he paid for a meal by credit card, he found that his dollar brought him twice as many pesos at one of the city’s thriving money changers as locals call the “blue” exchange rate.

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“It made me feel a bit silly,” Zegarra told Reuters.

The South American country imposed controls in 2019 to protect its beleaguered currency, limiting access to dollars and triggering a boom in informal foreign exchange markets where the peso is valued well below the official rate.

Over the past few months, the government has introduced various additional levies for foreign currency conversion, resulting in an explosion of different rates ranging from a so-called World Cup ‘Qatar’ rate for travel to a so-called ‘Netflix’ rate. for overseas services like streaming. .

The flowering of parallel exchange rates has accelerated in recent weeks, becoming the target of online memes, with one calling the chart “tutti-frutti”. But it also reflects a serious risk the government faces in protecting the dwindling dollar reserves needed to service the debt.

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Investment bank Morgan Stanley estimated in a September report that the central bank’s net liquid foreign exchange reserves had fallen to less than $3.5 billion, which the government sought to reverse with grain sales. faster.

The government and the central bank argue that the controls are necessary to protect foreign exchange reserves and stabilize the economy. She wants to avoid a sharp devaluation, although the peso has slowly but surely lost around 50% against the dollar this year anyway.

“It is clear that the central bank has a duty to preserve its reserves and that is why it is working hard to do so,” said a central bank source who requested anonymity, adding that the parallel rates were simply caused by the “supply” of the market. and demand.

The bank declined to comment.

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DOLLAR “COLDPLAY”

Argentines have long been wary of their own currency, often choosing to save in dollars to protect against inflation – which is heading towards 100% this year – and devaluation. Previous harsh and sudden capital controls have also made savers wary.

The swirling economic crises of recent years, including a debt default and a major deal with the International Monetary Fund (IMF), have put increased pressure on the currency and reserves.

“All these different exchange rates show political desperation for dollars,” said Eduardo Maehler, 37, a freelancer in Buenos Aires.

The government has tightened access to the dollar and added levies, particularly on foreign travel and luxury goods. He created a temporary soybean dollar in September to boost soybean exports by giving growers more pesos for their dollar sales.

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Some have arisen more organically: a so-called “Coldplay” dollar to pay sports stars or music artists in the country. The British band are playing ten shows later this month. A “Netflix” dollar, on the other hand, refers to a rate raised by various taxes on overseas streaming services.

This month, the government added a 25% tax on monthly spending over $300 on foreign travel, foreign currency goods and luxury goods, in addition to a 45% rate and an existing 30% tax. The timing of the move ahead of the FIFA World Cup next month has led to it being dubbed the ‘Qatar’ rate.

“Clearly this has made trips more expensive in local currency,” said Federico Rossi, owner of a travel agency in the city, adding that some people would forego trips as a result.

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Aldo Abram, executive director of consultancy Fundación Libertad y Progreso, said moves to keep the peso “artificially cheap” were unsustainable and would fuel inflation.

“We know the cost of imposing these controls over time: it always ends in a very deep crisis,” he said.

Pedro Cristino, a grandfather in Buenos Aires, was stoic. He blamed persistently high debt levels for decades for putting the current centre-left government in a bind.

“The government is looking for many ways to solve the problems, some are sound, some are wrong,” he said. “All I know is that I wouldn’t want to try to govern right now.”

(Reporting by Lucila Sigal; Additional reporting by Jorge Otaola and Walter Bianchi; Editing by Nicolas Misculin, Adam Jourdan and Deepa Babington)

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