The country commanded by the Peronist Alberto Fernández must refinance a debt of 45 billions of dollars (about R$
billion) with the IMF. Inflation, which reached 83% in September, should reach 100% by the end of 2022. In addition, more than a third of the population remains in poverty. In this scenario, the hemorrhage of dollar reserves and the multiplication of exchange rates are reconfiguring the economic and financial situation of Argentines, who prefer to consume and spend immediately or invest in cryptocurrencies than keep money in the bank.
Economists call this “flight to consumption”, a characteristic of periods of inflation and anticipated currency devaluation. In this scenario, restaurants in the capital, Buenos Aires, register the highest consumption of the last seven years, according to official data. Domestic tourism also benefits from this logic. A long weekend at the beginning of the month set a new record, according to the government, with 2 million trips in a country of 46 million inhabitants.
Santiago Manoukian, economist at Ecolatina, in an interview with Le Monde, observed another consequence of this economic phenomenon: Argentines tend to resort to the parallel market, where just over 238 pesos are needed to buy a dollar, versus over 280 pesos in the official quotation. “In this context, consumption is a rational choice”, analyzes Manoukian.
Another way that Argentines found to circumvent the risk of saving money, according to the Market Intelligence Study of the Americas, was to buy cryptocurrencies. Twelve out of every one hundred Argentines are making this type of investment.
This percentage is twice the average in Latin America, while in the United States 16% of the population bought cryptocurrencies at the end of 2021.
The Morning Consult is more optimistic. According to the institute, about a third of Argentines said they buy or sell cryptocurrencies at least once a month (twice as many as Americans), and more than half of those polled in the survey reveal that “protecting their savings” is one of the main benefits of this type of investment.
Although the cryptocurrency market has weakened in recent months, many Argentines see it as a safe haven in a country where rising inflation and the national currency and bank accounts.
The peso melts like ice cream
“Money here is like ice cream” , Marcos Buscaglia, an economist from Buenos Aires, told the New York Times. “If you keep the weight for a long time, it will melt as much as what you can buy with it”, analyzes.
The problems of the world supply chain and the war in Ukraine contributed to the increase of prices, but economists mainly blame Argentina’s problems for years of excessive state spending. As the government does not collect enough to compensate for the deficit, the central bank prints pesos, causing inflation to rise even more.
“Argentina’s big problem is that there are not enough dollars to meet with its obligations”, Flavio González, a lawyer and professor at the University of Buenos Aires, pointed out, in an interview with Gazeta do Povo.
He described that the Kirchnerist governments do not want to face the problems of fiscal deficit, uncontrolled currency issuance and the devaluation of the peso. González also noted that the country’s taxes and legislation are not attractive to foreign investment and that Argentine policies lack international credibility, in addition to promoting poverty.