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Published on : Wednesday, November 13, 2013
Almost in all the emerging economies there are two foreign exchange centres. One is the
government-run exchange while there are hundreds of others who deal illegally. A French
doctor, Eric Francos, is on a three-week vacation with his wife and two children in Argentina.
One day in broad daylight he was huddled off to one side of a pedestrian thoroughfare clogged with shoppers in downtown Buenos Aires, taking $100 bills out of his money belt as illegal money-changers beckoned with calls of “dollars, euros, exchange”.
“I know the risks, but so far I’ve never had problems, I try to be careful,” Francos, who plans on touring vineyards in the province of Mendoza, which lies 1,100 kilometers (680 miles) west of the Argentine capital and is renowned for its Malbec wine, said last week as he stuffed pesos into his front pants pocket. “Changing dollars in the streets is not worth it.”
Visitors who spent $622 million during the second quarter sold only $342 million through
official channels including banks, a 48 per cent plunge from a year earlier, according to government data.
Tourists like Francos, who got 9.7 pesos per dollar compared with 5.9729 at the official rate, are turning to the black market to obtain local currency and shaving as much as 40 per cent off their vacation costs. They’re also depriving the central bank of the foreign reserves the government uses to pay its debt, which is the most expensive to protect against non-payment anywhere in the world using credit-default swaps.
Visitors who spent $622 million during the second quarter sold only $342 million through official channels including banks, a 48 percent plunge from a year earlier, according to government data.
Tourists who change money illegally face the risk of receiving fake bills or being robbed.
Street money-changers, known colloquially as arbolitos, or Spanish for little trees because they’re like a fixed part of the landscape, often ply their trade within a few yards of policemen.
An alternative is to visit one of the small shops or back-street offices known as “caves” that use tourist agencies or dealerships in antiques, gold and coins as a front for trading currencies.
Sanctions for illegal currency trading range from a fine of 10 times the transaction if it’s the first time a person is caught to as many as eight years in prison.
Some shops and restaurants accept foreign currency as payment, giving clients more for their dollars or euros than they would get at a bank or using credit cards.
The rising costs have also encouraged greater numbers of Argentines to buy goods abroad
while on vacation and to withdraw cash to exchange in the black market at home. While the
government slapped a 20 per cent charge on the transactions to discourage consumers, the
implied rate of 7.176 per dollar is still cheaper than the black market.
As a result, the country will run up an $8 billion tourism account deficit, or the difference between what foreign tourists spend in Argentina and what Argentines spend abroad, according to Delgado.