In advance of my trip to Argentina, I discovered that if I go to an official currency exchange or use my credit card, my dollar would be worth about 5.4 pesos. Not bad, considering the most expensive taxi in this huge city is about 50 pesos ($9.25) and my hostel was going to cost me about 75 pesos ($13.89) per night. In fact, according to The Economist’s Big Mac Index (a fascinating tool in and of itself) my dollar at this exchange rate goes further than it does at home. That’s always fun. But then I found this:
That’s right. There is a black market for Argentine Pesos, called the “blue dollar” exchange rate. Apparently it is Argentina’s worst kept secret. It’s literally in the newspaper and on Twitter. Everyone I talked to told me a different method for tapping into the market. Direct quotes from other travelers:
- Walk to Florida Street and approach the first guy on the street you here saying “Cambio, cambio, cambio.”
- There’s an old lady in a store at this address. Go to the back of the store and say this phrase.
And then my favorite, directly from a trusted friend:
Naturally, I went with that one. The guy I met (I don’t think his name was actually Arturo) was very nice and he gave me 7.9 pesos for my dollars. When I came back the next day with a much bigger wad of dollars, the rate was up to 8.1 pesos per dollar. 5 days later, I was out of money and, to mix things up, I tried the Cambio guys on Florida Street. They gave me 8.5 pesos! So I went back to “Arturo” the following morning: 8.7 pesos!
Take a moment to let this sink in. According to the Big Mac Index, if I take the peso equivalent of US$1000 out of an Argentine ATM, I’ll get 5,400 pesos, which behaves as if it were US$1,149 due to the purchasing power disparity. But if I have that $1000 in cash? I can convert that to 8,700 pesos on the black market – with the normal exchange rate, it would cost me US$1611 to get that much. Factoring in purchasing power, my $1000 (now $1611) behaves as if it were $1851. Needless to say, I went from living luxuriously to living like an extravagant king.
The friend I was traveling with admittedly does not love math, but he did love this. So many questions came up, most of which bore an eerie resemblance to CC standard 7.RP.3 assessment questions. But these ones were as authentic as it gets. To name just a few of the actual questions we asked each other out loud:
- How much had the value of our dollar changed in one week? (here are some interesting charts on the fluctuations)
- How much of an advantage in purchasing power did we have over the local Argentines? (I got a ton of practice on proportional reasoning calculating those exchanges above)
- Which gives us the best deal: using the official exchange rate that I get on my credit card (that has no fees), or taking US$ out of the ATM for a fee ($10 plus 3% of money withdrawn) and exchanging money on the black market?
- Follow-up question: is it worth it to take a 700-peso ferry to Uruguay to get US dollars out of an ATM that we could then exchange for black market pesos? (dollars, not surprisingly, cannot be found anywhere in Argentina)
- When we get quoted prices in US$ at places that will accept pesos, how much does it actually cost us? (This happened all the time. For example, we wanted one night in a fancy hotel. The room was quoted at $170 per night, but they allowed us to pay with our black market pesos, and they converted using the official exchange rate. So, how much would that actually cost in dollars? Much less than $170, that’s for sure)
- Should I retire young and make a living by occasionally bringing a briefcase of dollars to Argentina, changing them to pesos and then changing them back to dollars?
As I write this, I’m sitting in the airport about to head back to San Francisco with 2,400 pesos in my pocket that cost me $275. If I exchange them back at even a bad exchange rate, I might actually be able to turn the $275 into about $415. That seems like the most ridiculous loophole in the international currency market, but it does makes sense. A part of me hopes this doesn’t work, because if it does I might actually retire. And this is too juicy not to make it into the classroom.
Update: Joke’s on me. These 2,400 pesos are completely worthless outside Argentina. Literally. Forget getting a bad exchange rate; no institution in the United States will accept them at all. While this is disappointing, I suppose it’s a bit reassuring that there’s no giant loophole that allows people to magically double their money in a flash. I guess I won’t retire and will remain a teacher.
Dave aka Mr. Math Teacher said:
Why weren’t they accepted? Were they counterfeit? Or is inflation so rampant they are not traded in the states?
A) Their currency is unstable (with both inflation and counterfeit bills).
B) I heard that the Argentine government has literally forbid other governments from converting pesos to dollars or euros. Argentinians consider their own currency to be close to worthless, so they all want dollars or euros, and the Argentine gov’t wants to prevent them from doing that. It seems pretty complicated.