argentina’s economic problems

When I was back home, sitting at my computer watching the USD exchange rates change in south America, I have to admit that I was excited about coming to Argentina.  When I was here in 2008, one dollar was equivalent to 3 Argentine pesos.  Today, the official rate is $1 USD = ~8 Argentine pesos.  That seems like a good thing, right?  Maybe the economist reading this is shaking his/her head… inflation is a nasty problem.

I just read this article.  Inflation has caused significant price increases during the last year down here.  It’s predicted to get worse.  We often see official prices at bars/hostels marked with an ‘x’ and the new price written in pencil.  We definitely feel like things are expensive, and it’s hard to imagine what it would be like to watch your savings slowly devalue… as could be expected, we hear about protests and strikes in far-off Buenos Aires.  I wonder what the mood of the city will be when we visit months from now.

The US dollar has become a sought-after currency in Argentina.  If you were knowledgeable enough about this situation prior to entering the country (we were not), you would have arrived with as much USD as you felt comfortable carrying.  In the main plazas you can take advantage of the “blue dollar” rate, which can be as high as $1 USD = 12 ARG peso (if you come with $100 bills).  We will certainly be looking into this for future visits to the country.

When I was in Buenos Aires last, the city was suffering from a coin-shortage crises.  You can read about the problem here.  Because of inflation, I imagine the country will soon be suffering from a shortage of large bills.  The highest denomination bill in Argentina is 100 pesos.  This is currently worth about $12 USD, and will quickly become the most used piece of currency.  Those once precious 1 peso coins are almost laughably valueless.

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