Argentina is currently experiencing an economic downturn that has been going on for a few years. The country has been in recession since 2018, and the economy will continue to contract this year as well. The government’s response to the crisis has been inadequate, leading to protests all over the country. The current downturn shows no signs of improvement. The COVID-19 Pandemic and Russia & Ukraine have not helped either. Read along to learn about the Blue Dollar phenomenon in Argentina.

Argentinian Protestors | Source: AS

Economic Downturn

The recession in Argentina has been caused by a number of factors, including falling commodity prices and the decline of global trade. A significant portion of Argentina’s exports are agricultural goods, so when farmers produce fewer crops due to unfavorable weather conditions or droughts, it can have an impact on overall GDP growth. Additionally, other countries may choose not to import their goods from Argentina if they believe those goods will be too expensive compared with what they could get from other countries that are offering similar products at lower prices. This would also result in lower exports for Argentina (and hence less growth).

Argentina GDP Growth 2021 | Source: World Bank

The economic downturn resulted in a decline in GDP, a decline in government revenues and massive inflation. To mitigate this negative trend, the government has cut spending and raised taxes while pledging to increase foreign currency reserves.

Argentina 5 Pesos Banknote, 2015 ND | Source: Banknote World

How The Recession Affects People

The recession has caused massive job losses and increased poverty levels across the country. The number of people living in poverty has increased since former president Mauricio Macri took office, according to a report by the National University of La Plata. The report also noted that the number of Argentines living in poverty has increased during this time period as well. The unemployment rate has risen as well due to layoffs or companies closing down operations due to lack of cash flow or economic uncertainty.”

Argentina 1,000 Pesos Banknote, 2017 ND | Source: Banknote World

Since 2016 the Argentine peso has depreciated significantly against the U.S dollar. It experienced similar depreciation in 2001, the year Argentina defaulted on its debt, and it continues to depreciate as the government makes international loans from China and Russia to fund its spending plans. As the peso declines in value, so does your purchasing power.

Official Rate Vs Blue Dollar Rate | Source: BlueDollar

The Blue Dollar Exchange Rate

One interesting trend that has arose in Argentina during this crisis is people who travel to the country to get more bang for their buck while the rest of the world is seeing massive price hikes in everyday commodities. The reason for this is the parallel exchange rate aka the Blue Dollar. With the blue dollar you get more Pesos in exchange for your money. The official exchange rate for USD to Argentinian Pesos is $1 USD : $170 Pesos. While the Blue Dollar is $1 USD : 320 Pesos which is practically double. The transactions take place at exchange offices and cash agencies like Western Union. They result in large piles of cash since the country has not printed larger denominations as inflation has grown. It is not clear who operates sites like Blue Dollar. What is clear is that Argentinians are eager to get USD as it is considered a safe place to store their savings. As a reason Argentina has one of the largest holders of $100 bills. In recent years the youth have also turned to crypto currencies. In 2021 the economy bounced back and the estimate for 2022 is also positive however there is still a long way to go for recovery.

The Blue Dollar Doubles Peoples Money When Exchanged for USD | Source: AS

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