Bitcoin, Dollars and Pot-Banging Protests in Argentina.

Eugen Leitl eugen at leitl.org
Thu Oct 25 02:43:01 PDT 2012


https://thebluemarket.wordpress.com/2012/10/18/bitcoin-dollars-and-pot-banging-protests-in-argentina/

Bitcoin, Dollars and Pot-Banging Protests in Argentina.

This post is a peep into the underground exchange markets for dollars and
bitcoins in Argentina. For the last couple of weeks, I have experienced the
informal exchange of bitcoin and dollars on first hand in Buenos Aires.
Furthermore, I have realized how both locals and expats may reap significant
gains by using bitcoins as a medium of exchange.

 

Inflation and Monetary Restrictions

Before we dive into the details of the underground markets in Argentina, let
me try to paint the picture of the current economic situation in Argentina.

For several years the Argentine inflation rate has been bumping around 25-30%
per annum, according to figures published by independent institutions. The
Argentine government doesnbt recognize the independent estimates and has
allied with INDEC, the National Statistics Institute, to calculate inflation
figures 2-3 times lower than the independent figures. The interesting fact is
that the pesobs fixed exchange rate with the dollar is only taking into
account INDECbs inflation rate of 8-12%, causing overvaluation of the peso by
not incorporating the true higher inflation rate. INDEC is indeed a neat
implementation of an Orwellian bMinistry of Truthb, and the magic
calculations have raised concerns with IMF who is threatening to expel
Argentina from the organization.

Naturally the high inflation rate has caused capital flight out of Argentina,
and every Argentine with a bit of savings is looking to exchange their pesos
into something more secure. In order to stop the capital flight and fortify
the central bankbs reserves, the government has implemented strict measures
to prevent Argentines from obtaining foreign currencies. For example, only if
you are travelling abroad are you allowed to exchange pesos for dollars
legally, but there is a limit of 100$ per day abroad. Recently the government
also imposed a 15% tax on all foreign credit card purchases, and a 50% custom
duty on any goods which Argentines purchased abroad. Aside from the
outrageous taxes, this legislation completely flashes your personal banking
details to government officials, who can then snoop on your shopping list.

Estimated 200.000 people in the Plaza de Mayo demonstrating against
government policies.

The complex regulatory environment has caused Paypal to suspend all domestic
transactions in Argentina. Ebay and Amazon has followed suit with similar
restrictions.

 

The Blue Dollar

In Argentina the dollar you care about is blue. The reason is that the
difficulty for locals to acquire dollars through traditional means has fueled
a secondary dollar exchange market. The unofficial exchange rate, known as
the bblue dollar rateb, is approximately 25% higher than the official rate.

For expats, itbs a no-brainer that you are being ripped-off by withdrawing
cash at ATMs from established banks, where the withdrawal is conducted at the
official exchange rate currently around $ARS 4.70 pesos per dollar. In
comparison, if you exchange USD on the bblue marketb you get around $ARS 6.20
pesos per dollar.

Luckily before travelling to Argentina, my girlfriend and I were tipped off
to this news and carried along dollars in cash when entering the country. One
can exchange dollars at the blue market rate simply by heading to Bs. Aires
main shopping street, Calle Florida. Here lots of street vendors are drifting
around advertising their business to anyone who looks like a potential
customer. The street vendors here are known as arbolitos by locals. Arbolitos
means blittle treesb, a reference to the street vendors are full of bgreen
leavesb. If you are looking to exchange dollars the street vendors will
quickly approach you and provide a quote. If you accept the quote, you just
head to a nearby jewelry or electronics shop and complete the transaction.

Above approach is generally safe but I wasnbt too keen on exchanging dollars
with street vendors. Instead I posted a small note on an online forum and got
in contact with a couple living in Buenos Aires, who were eager to exchange
dollars for pesos at the blue market rate. The snapshot below is the result
of this exchange b and what an underground dollar market looks like.

 

The Bitcoin Hero

The dollars we brought into Argentina are soon running out, and we have been
looking for alternatives to increase our dollar reserves. One approach is to
cross the border to Uruguay b but you have the hassle of ATM withdrawal
limits and the risk of travelling with lots of cash. There is also a service
called Xoom, which allows you to transfer money from abroad to various
pick-up locations in Bs. Aires. The magic of Xoom is that they somehow manage
to provide the blue dollar exchange rate. Unfortunately they also require a
US bank account to use its services.

Another possibility is Bitcoin, a new electronic currency, which has been
flourishing online for the last couple of years. In our situation Bitcoin has
turned out to be a great vehicle to transfer money into Argentina and achieve
the blue dollar exchange rate. I completed my first bitcoin to pesos
transaction last week and gained 25% in comparison to the official exchange
rate.

 

The way it works is that you simply buy some bitcoins online through one of
the many bitcoin exchanges. Mt.Gox is by far the largest but there are local
alternatives as well, such as Bitcoin Nordic. Once you have your bitcoins you
identify an Argentine who is on the market for bitcoins at the blue dollar
rate. Given the economic situation there are lots of Argentines who are
looking to get rid of pesos in exchange for other more secure assets.

In my case I circulated a note to Eudemocraciabs bitcoin mailing list
announcing that I was interested in selling bitcoins. The price I offered was
the Mt.Gox USD price converted to pesos at the blue USD exchange rate. Based
on the number of replies this was an attractive offer, and after some email
correspondence, I agreed  to meet up with one contact and conduct the
transaction. After getting the agreed pesos in cash I made a one-click
transfer of bitcoins to his online bitcoin wallet. A bitcoin transfer is
instant and non reversible, and the picture below shows how we could confirm
completion of the transaction on the spot.

Because of the dollar restrictions and the escalating inflation the demand
for bitcoins in Argentina is greater than our personal need for pesos.
Therefore, if you are an expat or just travelling through I encourage you to
explore bitcoin as an alternative to finance your stay. Not only will you get
a 25% higher exchange rate but you will also help locals protect their
savings from being hollowed by inflation.

I believe the bitcoin adventure is just kicking off in Argentina. Also Ibm
keen to see how the 200.000 Argentines demonstrating for libertad in the
Plaza de Mayo might use bitcoin to fight the monetary restrictions
themselves. Maybe itbs an even better approach than banging a pot?





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