Why Argentines are obsessed with the dollar - according to BBC Mundo

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  • Argentina: why the relationship of Argentines with the dollar is different from that of other countries in the region

    "Do you know what the price of the dollar is?" Asks an Argentine journalist to a passer-by in the streets of Sao Paulo.

    And this one answers: " Não ". And another agrees: " Não tenho nem ideia ". And one more adds: " Here is reais, or dollar does not exist here ."

    The report, from the legendary and extinct humor program Caiga quien caiga, is from 2011, but today it is broken in social networks as a way to laugh -and illustrate- the economic crisis that Argentina is going through.

    If in moments of economic calm it is difficult to find an Argentine who does not have updated information about the dollar, today it is impossible: the data dominates the news, newspapers, networks, conversations.

    The Argentine peso has depreciated more than 50% last year, which is for many synonymous with rising inflation, of unemployment and recession.

    It is common to hear an Argentine say that they are "obsessed" with the dollar, even though the economy is not dollarized and there are no plans in that sense, as the government of Mauricio Macri had to deny a few days ago.

    Where does this obsession come from, then?

    It's not just about numbers

    At least in numbers, Argentina does not have a relationship much more dependent on the dollar than other countries .

    In fact, its economy is one of the most closed in the region: imports, which are paid in dollars, represent 13% of the Gross Domestic Product, one of the lowest rates in the world.

    Here - as in Chile, Uruguay and Peru - it is legal and common to have a dollar account , but the amount of deposits in foreign currency is not much higher than in those countries, where there is also a certain obsession with the price of the dollar.

    Perhaps you have to take into account the amount of dollars that Argentines have in accounts outside the country, as well as many that keep in their properties, to know what percentage of savings is in foreign currency.

    The Interdisciplinary Institute of Political Economy of the University of Buenos Aires (IIEP) has a dollarization coefficient that tries to take into account these and other variables.

    In its calculation, Argentina has a dollarization rate of 70%, one of the highest in the region next to Uruguay (and without taking into account dollarized countries such as Ecuador). Chile has 11% and Peru 44%. The risky bet of clinging to the dollar as a lifeline of the economy Here many buildings are paid in dollars, much of the inputs for production are imported and products such as gasoline or appliances are valued at international prices. The situation, at least in numbers, is not too different from Peru or Chile. "The difference," explains Santiago Cesteros, economist and researcher at IIEP, "is that the relationship of Argentines with the dollar can not be explained only with macroeconomic variables, but has to do with a question of coordination and expectations ." That is to say: of culture. "I felt I was doing something illegal": the odyssey of having to buy a house without credit and in cash in Argentina

    The role of history

    It is estimated that in Argentine banks there are between 700,000 and one million security boxes, not counting the dozens of private companies whose business is to store dollars in cash in modern and not so modern vaults in the center of Buenos Aires.

    According to Central Bank estimates, up to US $ 40,000 million are outside the banking system, almost double what is inside and only a little less than what is in international reserves.

    Economists agree that the crisis of 2001 and the "corralito" -a prohibition of withdrawals of money- are very fresh in the memory of the people, who therefore do not trust the banks.

    Nor do they trust in the Peso, not before in the Austral, or the Peso National Currency. This is due to the constant devaluations of the last 40 years.

    The Argentine economic mess has several historical roots. One of them is the so-called external constraint: the country does not produce enough dollars to sustain what it consumes.

    In a reductionism, it can be said that Argentina suffers from an obsession with the dollar because there are not enough dollars in its economy.

    Transfer to prices

    The lack of confidence in the economy is what explains, according to Cesteros, the importance of the dollar in this country, and its difference from the rest of the region.

    " Argentina has the highest price transfer in Latin America, " he tells BBC Mundo.

    "In all countries there were major devaluations in recent years, but only in Argentina (and Venezuela) there was a consequent acceleration of inflation," he adds.

    Part of the current Argentine crisis is due to an international atmosphere of uncertainty that has hit all the currencies of emerging economies, such as Latin American ones.

    The Brazilian real, for example, has devalued 25% in the last year, but that has not caused the country to fall into recession or increase inflation and unemployment.

    Almost the opposite happens in Argentina, where, among other things, the agents of the economy highlight their goods or services as soon as they see the news of the devaluation, and not when prices rise organically due to the rise of the dollar (as it happens in others). countries).

    It is a measure of protection, perhaps speculative, inspired by previous events, but also an incentive of higher inflation, an ingredient of a snowball.

    Come now, it happened before.

    Another of the videos that are rotating through Argentine social networks is one of the monologues of the humorist Tato Bores, who in 1962 made a dissertation that does not lose validity.

    His conclusion was that if all Argentines buy and collect dollars, "we can strike a fantastic blow".

    " The day we have all the dollars in the world we will go to the United States with their money (twine) and they will have to give us the country."

    "I do not explain how the Yankees, who are so alive, do not realize the danger they are running with us (the Argentines)."