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The almighty dollar

When the economy gets tough, Argentines flock to the dollar.

A money changer in the financial district of Buenos Aires advertises the exchange rate. (Anil Mundra/GlobalPost)

BUENOS AIRES — The eminent Argentine historian Felix Luna recently said: “The world can fall; but in Argentina, when there's a problem, people run out to buy dollars.”

With the latest economic crisis now setting in, Argentines want U.S. dollars as much as ever. It makes little difference that this problem started in the United States — the downturn is becoming Argentina's, and when that happens, no one wants to be stuck with pesos.

Some economists estimate that Argentines hold more dollars per capita than any other populace in the world, outside of the U.S. And a survey by Business Monitor Latin America found that 52 percent of Argentines believe the dollar will be the dominant world currency in coming years — which makes them twice as confident in the dollar as other Latin Americans.

The peso's value has steadily weakened since the middle of last year, and as a result, Argentines have begun to keep more and more of their money in dollars. Private dollar deposits have grown by 30 percent. Unlike what you learn in Econ 101 — that demand decreases as a good becomes more expensive — demand for dollars in Argentina actually increases with the exchange rate, which further drives up the dollar's price in pesos.

“In Argentine culture, dollars are a currency of saving and reserve,” said congressional candidate Carlos Heller, president of Credicoop Bank, in a radio interview. Argentines may have well over $100 billion invested offshore, according to private economists — some say the figure is close to $150 billion.

Not everyone in Argentina, of course, has the means to open a foreign bank account. The rest of the populace can be seen lining up at exchange bureaus to buy greenbacks and keep them where they can. Economists estimate that there are about $10 billion in Argentines' pockets and safe deposit boxes, and under their mattresses.

Eduarde Roatta, who works in the exchange bureau of Banco de la Pampa, has watched the money-changing lines lengthen. But he says it's nothing particularly new. “This is a fact of Argentine history. It's a country that has always gone with dollars.”

“Always,” though, isn't exactly correct.

A century ago, Argentina had one of the world's most stable currencies and strongest economies, and had little interest in the dollar. But repeated devaluations over the decades has made Argentine money undesirable. The decline started during the reign of Juan Peron, who is said to have expressed his dismay over a blossoming domestic dollar trade by ascending to the storied balcony of the executive Pink House and asking his constituents, “Have any of you ever seen a dollar?”