Argentines spend most dollars since 2018 on strong peso policy

Argentines are spending the most amount of dollars in years as they cash in on a strong peso, stoking further worries over the path of President Javier Milei’s currency policy.

Credit card spending that originates in dollars or other foreign currencies reached US$645 million in January, the highest since February 2018, according to data from Argentina’s Central Bank. Those figures are just a portion of total outlays as they exclude debit card or digital wallet transactions, which have surged in popularity in recent years.

The spending trend stems from efforts by Milei’s team to keep the peso’s value relative to the greenback steady, partly by letting the peso weaken at a pace of one percent per month. And with wages and prices outpacing the currency’s slide, Argentina has become much more expensive.

January’s credit-card tally “represents a strong appreciation of the exchange rate, since it reflects how cheap it has become to consume in dollars,” said Juan Pedro Mazza, a strategist with Buenos Aires-based brokerage Grupo Cohen SA. “It points to a potential significant current account deficit in the first month of 2025.”

Argentines are now spending their money in relatively cheaper neighbours like Uruguay, Brazil and Chile, chipping away at the country’s trade and investment flows. Argentina lost US$2.1 billion last year, Milei’s first in office, from tourism based on how much its nationals spent abroad versus how much foreigners consumed in Buenos Aires and beyond, according to the country’s statistics agency.

Argentine governments on both sides of the aisle have long tried to discourage tourism spending abroad as the cash-strapped country needs all the dollars it can get.

Milei inherited and has maintained a series of taxes on foreign purchases so that the implied exchange rate is more expensive than if Argentines were to use their debit cards or cash. But the effectiveness of that effort has dwindled as authorities have pared back some of those taxes. Argentina also has multiple exchange rates because of currency controls and the gap between them has collapsed as Milei has propped up the peso.