Argentines flocked to buy dollars to protect savings from crisis

As political turmoil roiled Argentina last month and inflation surged to a three-decade high, the population did what they do in every crisis: buy dollars.   

About 1.4 million people bought greenbacks on the formal market in July, up nearly 60 percent from June, according to Central Bank data published Friday afternoon.  

They did that despite hefty disincentives. Due to strict government controls, people can only exchange pesos for up to US$200 a month and have to pay 75 percent in taxes on top of that. The number of people buying dollars in June was the highest since 2020, when there was only one tax on dollar purchases, rather than the two there are now.  

Despite the levies, it made financial sense for many to exchange pesos for dollars at the bank instead of on the commonly-used black market. That’s because the peso plunged on the parallel market, making dollars significantly more expensive than at the official exchange rate, even when accounting for the extra charges. 

On Friday, a dollar on the black market cost 292 pesos, while the official rate with taxes is equal to about 253 pesos.  

The government’s political crisis – resulting in three economy ministers in one month – exacerbated already-high inflation in Argentina as businesses jacked up prices and citizens ditched pesos for dollars to shield themselves from losses. Savers buying dollars at the bank add further pressure to the Central Bank’s dwindling cash reserves that are meant to prevent a possible devaluation.