Argentines head to Uruguay to bypass dollar restrictions

For Felipe, an Argentine freelancer who works in the media, opening a bank account recently meant catching the ferry across the River Plate to Uruguay.

“I’m losing 40 per cent of my salary just because of the exchange rate,” he says. “That could pay a month’s quota at my daughter’s school or a small mortgage.”

As we have noted before Argentines now have to navigate what is essentially a multiple exchange rate system where the peso is artificially strong, faith in the currency is weak and barely a day goes by without some loophole to accessing dollars being closed to clamp down on capital flight.

Among the latest measures, Argentines are being stopped from transferring money between domestic PayPal accounts and converting it into dollars at a favourable rate in the process. Argentine PayPal users will now only be able to use the service for international purchases, which will be subject to a new 15 per cent tax applied to payments made with Argentine cards or Internet purchases.

Argentines also fear limits will be imposed on bank safety deposit boxes to dissuade people from saving outside the banking system.

If Felipe needs to buy imported equipment for his job, he is charged in dollars – but at the unofficial exchange rate, which is currently around 37 per cent higher than the official exchange – some 6.3 pesos per dollar, compared with 4.6. And this in a country where inflation is widely believed to be in the mid 20s per cent – more than double the government’s 10 per cent statistic.

“I felt sad when I signed the papers in the bank,” says Felipe. “But I have to put my wallet first.” And that means being able to do what he likes with the money he earns and on which he pays his taxes.

Of course, Felipe notes, going the Uruguay route “only makes sense if you’re paid abroad and in dollars”. For him, it means that if he travels, he can use his Uruguayan credit card without suffering a 15 per cent surcharge or having his bills cross-checked with his customs declarations to see if he should be charged a 50 per cent duty on purchases over $300 brought into the country. “I want to decide what to do with the money I earn … it feels like the government doesn’t trust its citizens any more and wants to have complete control”.

Uruguay – where, by the way, Felipe noted that opening a bank account was speedy and he was given his card immediately – is favourite holiday destination for Argentines, but the holiday industry fears it will be hit by the currency controls. The costs Argentines now face when trying to get their hands on foreign currency or when spending abroad, could mean a significant drop in holidaymakers or spending.

One proposal is for tour operators to grant Argentines more purchasing power by accepting Argentine pesos at a rate 15 per cent higher than the official level.

“I’d play by the rules if we were all playing the same game,” laments Felipe. “But there aren’t clear rules. I think the parallel dollar will rise to 8 or 9 to the dollar at Christmas. So I’ve decided to stop investing in my country for now.”

Posted By: Shawn Huyck