Why do Argentines save in dollars?
By Libertad y Progreso, courtesy of Ámbito Financiero
“Whoever bets on the dollar loses.” This famous phrase was said by former Minister of Economy Lorenzo Sigaut in 1981, to try to convince Argentines to stop saving in dollars. As expected, reality prevailed with an exchange rate escalation.
Today the BCRA is filling the market with regulations to try to control the Liquidated Cash Dollar (CCL) and the MEP (Electronic Payment Market) dollar, to ensure that the gap with the official dollar does not widen further (it is currently in the 70% range). The imposition of the exchange rate ended up causing people to seek to dollarize their savings by alternative means.
In this way, the Government and the BCRA are trying to plug holes as best they can. They managed to impose an exchange to slow the rise in the official dollar, but the parallel dollars shot up. Now they are looking to anchor the CCL dollar with appalling regulations, but Argentina’s blue dollars (the informal exchange rate) are already trading above $1.20. Thus, the Government imposes obstacles to the applicants for dollars, but it is clear that the Argentinians are going to look for a way to acquire them any way they can.
Now, why do we continually resort to save in dollars? Actually Argentinians do not love the dollar, but repudiate. the peso. From 1881 to the present, Argentina had 5 currencies: Peso Moneda Nacional (1881-1969), Peso Ley 18.188 (1970-1983), Peso Argentino (1983-1985), Austral (1985-1992) and Peso (1992 – present). In this way, our currency has lost 13 zeros since 1970.
The inability of our rulers to maintain the purchasing power of the currency causes us to seek to preserve the value of the fruit of our work in another currency, in this case, the US dollar.
In 2020, in the midst of the coronavirus crisis, the peso remains unreliable for those who want to save. It is only enough to observe how people who bet on the peso fared, either depositing their savings in a fixed term or investing in the Argentine Stock Market (S&P Merval), against those who simply bought dollars.
People who put their money in a fixed term of 30 days in January and renewed it at maturity along with the interest (taking the average rate that the BCRA reports each month) received a return of said investment is 10% — barely tying with the accumulated inflation in these four months of the year. With less luck, people that ventured on the Argentine Stock Exchange had a negative nominal return of 23%, taking the S&P Merval index as a reference.
Turning to the saver who placed his savings in dollars in January, if we look at how much the foreign currency trades in parallel markets, we see that today his savings increased by 47% in the CCL and 57% with the blue dollar.
Argentines do not save in dollars to be “unpatriotic” or for being an opponent of the Government. What we are looking for is simply to prevent our income from losing purchasing power in the hands of inflation. To save again in national currency, we first have to build trust and manage the state responsibly without falling into the short-term populism that led us where we are.