Blue dollar, parallel dollar, informal dollar. If you follow the economic news from Argentina – or if you are planning a trip to the South American country, you have undoubtedly come across some of these expressions. And they all mean the same thing: they designate the dollar that is traded outside the formal circuit – one could say that it is the parallel market, but in the Argentine case it is the street dollar.
Blue dollar, sadly famous in recent Argentine history
The blue dollar explains the Checked fact-checking website, there has always been the extent to which people who wanted to carry out purchase and sale operations outside the formal market. However, in some periods in Argentina’s recent history, when citizens’ ability to buy dollars is legally restricted, it has become more important.
The first was in 2011, when then-President Cristina Fernández de Kirchner established the so-called “cepo cambiario”. In 2019, six days after assuming the presidency, Mauricio Macri lifted threshold controls. But four years later he imposed them again. That was a second milestone.
In the current government of Alberto Fernández, the Ministry “added a 30% tax (Imposto para uma Argentina Inclusiva e Solidária, the PAIS) and a 35% withholding tax on account of income tax, in addition to a series of inhibitions to buy dollars from banks for different situations”, explains Chequeado.
Due to these controls, which are precisely the limits on the amount of dollars that people can purchase on the official market, Argentine citizens who wish to obtain dollars turn to the parallel market, where the price in these circumstances is less advantageous than the official one (the dollar is more expensive), but there are no restrictions.
Chorus of Voices on the Florida Street Boardwalk
“Change, change, change”. When you walk along the famous Florida street promenade in the city of Buenos Aires, you hear these words over and over again. After a while, it sounds like a chorus of voices that, from different places, are making the same offer: to sell them their dollars.
For tourists arriving in the country, the opposite situation occurs: the blue dollar is the price that best suits them, because if they choose it, they will now receive more pesos for each dollar.
Blue dollar highs and lows
How can the blue dollar fluctuate? The answer, say analysts consulted by CNN takes into account a context in which at least three factors are combined.
One of them is high inflation, which so far has accumulated 36.2%, according to Indec (Argentina’s National Statistics Institute), and is on the way to being one of the highest in the region.
A second factor is the strong issuance of Argentine pesos to finance Treasury spending and bond redemptions. Eugenio Marí, economist at Fundación Libertad y Progreso, referred to this point in an analysis of the foreign exchange market.
According to him, the variations respond to two factors. One is “a growing distrust in the peso and in the government’s ability to move towards macroeconomic balances that reduce risk” and the other is a “festival of monetary issues that the Central Bank has been holding, which has flooded the peso market, logically lowers its value”. In other words, supply and demand.
It is also necessary to mention the measures to cut off access to the formal dollar for importers, who are forced to buy foreign currency in the informal market, which increases the pressure on the price of that dollar, explains the CNN Radio Argentina.
“Prices are often a state of mind”
After the dismissal of Martín Guzmán from the Ministry of Economy, the price of the blue dollar soared by around 9%. This variation shows the psychological factor that impacts the price, according to an analysis carried out in CNN by finance specialist Claudio Zuchovicki.
“The dollar has no technical value,” he said, and “prices are often a state of mind.” He explained with an example far removed from the dollar. How much is a boat worth? Say, for example, $10,000. But how much is a boat worth next to the Titanic when it’s sinking? Undoubtedly much more. This shows that value is relative and fear plays a role.
“The uncertain is worse than the bad. When you have that level of uncertainty, you try to prevent yourself in the best possible way”, he said after the exchange of ministers in the Economy portfolio, which Silvia Batakis took over. This uncertainty can mean holding shares instead of selling them in the case of companies and industries and trying to save dollars if you are an employee.
Fernando Losada, chief emerging markets economist at Oppenheimer in New York, recently told CNN that the devaluation of the Argentine peso precisely “indicates that there is no confidence” in the government’s economic strategy, so “the population flees the pesos to take refuge in whatever else the population thinks offers them a better store of value.
*With information from Ignacio Grimaldi, Juan Pablo Varsky, Nacho Girón and Emiliano Giménez, from CNN.
Source: CNN Brasil
I am Sophia william, author of World Stock Market. I have a degree in journalism from the University of Missouri and I have worked as a reporter for several news websites. I have a passion for writing and informing people about the latest news and events happening in the world. I strive to be accurate and unbiased in my reporting, and I hope to provide readers with valuable information that they can use to make informed decisions.
