What is Argentina’s blue dollar and why does its price go up and down?

( Spanish) — Blue dollar, parallel dollar, informal dollar. If you follow the economic news in Argentina —or if you are planning a trip to the South American country—, without a doubt you have come across some of these expressions. And they all mean the same thing: they designate the greenback that is traded outside the formal circuit. It could be said that it is the black market, but in the Argentine case it is the street dollar.

The blue dollar, sadly famous in the recent history of Argentina

the blue dollar, explains the site Checked, it always existed to the extent that there were people who wanted to carry out purchase and sale operations outside the formal market. However, in some periods of Argentina’s recent history, in which the ability of citizens to purchase dollars was legally restricted, it acquired greater importance.

The first was 2011, when then-president Cristina Fernández de Kirchner established the so-called exchange rate stocks. In 2019, six days after assuming the Presidency, Mauricio Macri lifted the stocks. But four years later he imposed it again. That was a second milestone.

In the current government, headed by Alberto Fernández, the Ministry “added a 30% tax (Tax for an Inclusive and Solidarity Argentina, PAIS) and a 35% withholding on account of the Income Tax, in addition to a series of inhibitions to buy dollars from the bank due to different situations,” explains Chequeado.

Due to the stocks, which are precisely the limits to the amount of dollars that people can acquire in the official market, Argentine citizens who want to get green tickets go to the black market, where the price in these circumstances is less advantageous than the official (the dollar is more expensive), but there are no restrictions.

The choir in Florida pedestrian

“Change, change, change.” When you walk through the famous Florida pedestrian street, in the city of Buenos Aires, you hear those words incessantly. After a while, it seems like a chorus of voices that from different spaces are making you the same offer: that you sell them your dollars.

And it is that for tourists who arrive in the country the reverse situation occurs: the blue dollar is the price that best suits them because if they opt for it they will now get more pesos for each of the green bills.

The ups and downs of the blue dollar

How can the blue dollar swing? The answer, say analysts consulted by Radio Argentina, will always be given in a context in which at least three factors are combined.

One of them is high inflation: between January and November, the increase in the consumer price index was 85.3% accumulated, according to INDEC.

A second factor is the strong issuance of pesos to finance Treasury spending and the bond redemption. Eugenio Mari, economist at the Liberty and Progress Foundation, referred to this point in an analysis of the exchange market. According to him, the variations respond to two factors. One is “growing distrust in the peso and the government’s ability to move towards macroeconomic balances that reduce risk” and the other is a “monetary issue festival that the Central Bank has been carrying out, which has flooded the peso market, logically it makes its value fall”. In other words, supply and demand.

We must also mention the measures to cut access to formal dollars for importers, who are forced to buy foreign currency in the informal market, which increases the pressure on the price of that dollar, explains Radio Argentina.

“Prices are often a state of mind”

There is also a more emotional factor, according to experts.

In July, for example, after the resignation of Martín Guzmán from the Ministry of Economy, the price of the blue dollar shot up by close to 9%. This variation shows, according to the analysis made on by the finance specialist Claudio Zuchovicki at that timethe psychological factor that impacts the price.

“The dollar has no technical value,” he said, and “prices are often a state of mind.” She explained it with an example far removed from the greenback. How much is a boat worth? Let’s say, for example, $10,000. But how much is a boat next to the Titanic worth when she’s sinking? Undoubtedly much more. This shows that value is relative and fear plays a role.

Fernando Losada, chief economist for emerging markets at Oppenheimer in New York, recently told that the depreciation of the Argentine peso precisely “indicates that there is no confidence” in the government’s economic strategy, then “the population flees the pesos to take refuge in whatever else the population believes offers them a better store of value.”

With information from Ignacio Grimaldi, Juan Pablo Varsky, Nacho Girón and Emiliano Giménez from .