Oh Argentina, where to start? First, a short reminder on recent past events. Having accumulated large amounts of foreign denominated debt, Argentina experienced a severe economic crisis in 2001 when it defaulted on its obligations causing the banking sector to freeze up and many businesses to close their doors creating widespread unemployment. During the economic collapse, Argentinians were able to access only minor portions of their rapidly depreciating bank savings and the ensuing protests caused the death of several people.
Ten years later, a protectionist model has triumphed in the country creating strange effects in every day market activities. Products that are not "made in Argentina" are either not allowed to be sold in the country, are heavily taxed, or are slapped with high tariffs raising prices significantly. For example, electronics such as computers are approximately twice the price as in Western countries and the sale of Iphones has been prohibited. A thriving black market has emerged with products being supplied by those traveling abroad and shopping trips across the Chilean border to buy clothes and electronics have become common. Argentina is definitely not a country for a cheap shopping holiday. The countries leaders have implemented this protectionist policy to promote growth of local industries but in reality it has reduced local access to many goods, promoted a black market that doesn't pay sales tax, encouraged the theft of foreign goods belonging to visitors, and all the while failed to promote much needed improvements in productivity of Argentinean companies.
Although modern and developed in appearance, Argentina has maintained a cash only culture. Credit cards are little used and extra charges are common, exasperating the occurrence of tax evasion since cash transactions without receipts are the norm rather than the exception. Obtaining change following a purchase can be a real challenge. Most businesses operate on nothing but a few pesos in the cash register and anything over 50 pesos ($10) can be difficult to change; signs that profits are low and working capital tough to come by. Paper bills appear so old and fragile that one is afraid it will fall apart before it can be spent. Counterfeits are rampant, occasionally dispensed in ATM's but most often handed to unsuspecting consumers by taxi drivers and corner store owners. Trust and honesty in everyday transactions is lacking.
Capital controls and lack of faith in the banking system has encouraged many to move savings out of the country. On the border with Uruguay, dogs are not sniffing for illegal drugs but rather for US dollars. As a foreigner you can access only $250 per transaction and local banks charge $6 per withdrawal making it the worst of the countries we've visited when it comes to accessing cash.
High government spending has led to a real inflation rate of more than 20%, one of the highest in the world. In the short term this has decreased unemployment and stimulated consumption but prices are rising so fast that it has made life visibly more difficult for the retired and for numerous people left out of the formal economy who's incomes have stalled. All this, combined with currency control measures that keep the Argentinian Peso artificially high, means that prices are rising faster than the currency depreciates making the cost of traveling here one of the highest on the continent.
With recent turmoil still fresh in their minds, Argentinians are firmly behind this "new" economic model preached by their beloved President Christina, even though visibly it has made life more difficult and has increased the odds of another economic choc to the overheating economy, which is sadly accustomed to dramatic boom and bust cycles. Based on conversations with locals and information published in the media, change appears unlikely and further economic deterioration is the likelier outcome before the country comes to terms with reality and chooses to fully reintegrate the global economy and starts making real, sustainable gains.
Although modern and developed in appearance, Argentina has maintained a cash only culture. Credit cards are little used and extra charges are common, exasperating the occurrence of tax evasion since cash transactions without receipts are the norm rather than the exception. Obtaining change following a purchase can be a real challenge. Most businesses operate on nothing but a few pesos in the cash register and anything over 50 pesos ($10) can be difficult to change; signs that profits are low and working capital tough to come by. Paper bills appear so old and fragile that one is afraid it will fall apart before it can be spent. Counterfeits are rampant, occasionally dispensed in ATM's but most often handed to unsuspecting consumers by taxi drivers and corner store owners. Trust and honesty in everyday transactions is lacking.
Capital controls and lack of faith in the banking system has encouraged many to move savings out of the country. On the border with Uruguay, dogs are not sniffing for illegal drugs but rather for US dollars. As a foreigner you can access only $250 per transaction and local banks charge $6 per withdrawal making it the worst of the countries we've visited when it comes to accessing cash.
High government spending has led to a real inflation rate of more than 20%, one of the highest in the world. In the short term this has decreased unemployment and stimulated consumption but prices are rising so fast that it has made life visibly more difficult for the retired and for numerous people left out of the formal economy who's incomes have stalled. All this, combined with currency control measures that keep the Argentinian Peso artificially high, means that prices are rising faster than the currency depreciates making the cost of traveling here one of the highest on the continent.
With recent turmoil still fresh in their minds, Argentinians are firmly behind this "new" economic model preached by their beloved President Christina, even though visibly it has made life more difficult and has increased the odds of another economic choc to the overheating economy, which is sadly accustomed to dramatic boom and bust cycles. Based on conversations with locals and information published in the media, change appears unlikely and further economic deterioration is the likelier outcome before the country comes to terms with reality and chooses to fully reintegrate the global economy and starts making real, sustainable gains.
Amazing post - explained in a way that only JP can do it! Love it!
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