BUENOS AIRES, Argentina — Hop into one of this city’s yellow-and-black taxis and the world-weary individual behind the wheel will probably do one of two things to initiate conversation. The first: slag off leftist president Cristina Fernandez de Kirchner. The second: bemoan a lack of US dollars in the country.
Argentina is a nation obsessed with the greenback. Their talk about the Benjamins peaked in October 2011, when the government initiated a clampdown on people buying the currency.
Fast-forward to present day and it is now effectively impossible for locals to buy, except when vacationing overseas — and even then they have to jump through a series of hoops.
With the country locked out of international markets — and reliant on the central bank as a lender — the state is desperate to keep its limited amount of US currency in circulation to help service overseas debt and infrastructure investment.
In May, the country even launched an ambitious tax amnesty project to try and get savers to exchange undeclared dollars for investment bonds in construction and energy. The bonds went on sale at the beginning of this month, with the amnesty due to last until the end of September.
Argentineans’ dollar love affair heated up in the 1990s, during the one-for-one exchange rate initiated by then-President Carlos Menem. The middle classes flocked to Miami, buying up the latest niceties to furnish their apartments. As the economy crashed, the dollar became the de rigueur saving currency — often stored under beds or in safety deposit boxes, away from the unreliable banks — when faced with an inflationary peso.
“Argentina has seen a significant amount of money leaving the system over the last five years, some $80 billion,” says Gabriela Nudel, head economist at Fundacion Capital, a financial consulting firm in Buenos Aires, referring to the dollar savings Argentineans tend to keep out of the banks.
“This made the government decide to tackle the issue in a questionable manner — by closing off the ability for the money to leave the system. This, of course, has created a parallel, or informal, market.”
Today an unofficial inflation rate of 25 percent and fears of another economic crash make Argentineans very uneasy. Even though they cannot buy legally, those with the ability to save — the middle class and above — are prepared to pay poor black market rates to have their precious dollars.
More from GlobalPost: Argentina tries to ditch the dollar
The flipside is that for foreigners entering the country with a strong currency, the informal market is hugely advantageous for buying local pesos.
Take Bautista, 36, a Chilean resident of Buenos Aires. He’s on his way to a “cueva,” or cave, what Argentineans call the illicit money changing offices that thrive throughout the capital. Like most people interviewed, he doesn’t want to give his last name.
“The truth is, I get a bit scared going to cuevas,” he explains, “because I know they’re not particularly safe places. At any moment the police could come and arrest both sellers and the buyers. It’s about going there to change my Chilean-bought dollars, having a quick conversation with the seller and leaving as quickly as possible.”
The whole exchange feels like something out of a movie.
He enters a French-style tower block in the downtown area, not far from Florida subway stop. At the desk, he has to give a password — a name —along with an office number. Stage one cleared and he’s pointed toward a wrought iron elevator and up several floors to an office.
The seller waits in the corridor to usher him into his tiny room. On the wall hangs a lone picture — a bucolic scene of horses in a field. At the far end of the room, a glass-fronted counter with a privacy partition. One side is for changing dollars to pesos; the other side completes the circle. Here there is no room for discussion: the seller presents Bautista with his “dolar blue” — or black market — rate, which he accepts. The money is counted and the customer leaves.
More from GlobalPost: Peru's king of counterfeit currency
As Bautista says, there are risks. In November last year, an American was shot, not fatally, as he arrived at a cueva, caught in the crossfire during a robbery.
The activity is illegal and unregulated: a currency exchange law from 1995 dictates fines or a prison sentence of between one and four years for the guilty financial institution. But in practice, authorities seem to turn a blind eye.
“It’s funny walking along nearby Florida street,” Bautista says. “It’s always full of people, many of them tourists. There are so many arbolitos [street hawks selling dollars] shouting ‘change’ and quoting the illegal rate. It seems as much a part of daily life there as touts selling tango show tickets.”
In May, the black market dollar rate reached double the official — a little over 10 pesos to the dollar as opposed just over 5 at the legal rate — meaning a foreigner with dollars could change money illegally at double the rate they’d get if taking money out of a cash machine with a foreign card.
For Bautista, despite the risks, he says that life becomes far more affordable with the black market rates.
Supporters of the government argue that Argentineans should stop nurturing the black market and have faith in their local currency. Saving in dollars is a concern of the elite, they say, while the poor have to worry about simply surviving on their peso salaries.
But for 31-year-old software consultant Ernesto, the dollar bind isn’t so much about saving as his ability to work efficiently. He has a roster of overseas clients and so charges in dollars — but when it comes to changing back into pesos for his bank account, he’s forced to do so at the official rate.
“The dollar situation makes software services companies [like mine] less competitive against our competitors in say Uruguay or Chile,” he says. “The dollar exchange rate remains at the same level, frozen by restrictions imposed by the government.
“But the price of everything here in Argentina continues to go up at 25 percent a year due to inflation. This means that you have to charge more and more dollars every time you send a proposal to a client abroad.”
From business moguls to bedroom hoarders — and despite the considerable restrictions — Argentina’s dalliance with the dollar is far from over.
WORD ON THE STREET
More from GlobalPost: The Argentine economy's fuzzy math problem