Giles Powdrill writes:
What do you get when you mix greenbacks with black markets and red tape?
In Argentina today, the answer is a ‘blue’ exchange rate: An informal market where $1USD currently trades for around 7.5 Argentine pesos (as of 23rd January 2013), or around 50% higher than the official rate of $1USD to 5 pesos.
Rampant inflation (conservatively estimated by the government to be around 10% but measured by independent assessors at around 25+%), draconian capital controls and a population that remembers clearly the dramatic collapse of the peso at the turn of the century, have resulted in a huge rise in the number of people seeking out the security of alternative currencies by whatever means are available. The rising popularity of the ‘blue dollar’ demonstrates both the level of concern consumers have about the ongoing stability of the peso, and the entrepreneurial spirit of the people.
Argentines are no strangers to alternative currencies. When the peso was pegged to the dollar in the 1990s, people became accustomed to using both. And during the height of the crisis in 2001, the government introduced the patacón, a state-backed bond that was used to pay bills and salaries and provide some liquidity whilst pesos were scarce.
What is different during the present economic uncertainty are the channels and tools that people are using to exchange their money and to secure their savings.
The influence of social networks
The use of social networks is one example. A public ‘blue dollar’ Facebook page has been set up to help buyers and sellers to connect directly; users can offer rates and locations and then agree transaction details via private messages. The approach bears similarities to the peer-to-peer loan site Zopa, where lenders and borrowers agree mutually beneficial rates and terms.
While arranging exchanges over Facebook is not risk free, it does offer users a greater sense of control than the potentially harrowing and anonymous experience of using a street moneychanger, or arbolito (arbolito means ‘little trees’; the moneychangers are so-called because they too are full of ‘green leaves’).
The more adventurous, and more technologically proficient, are going further, turning to the crypto-currency Bitcoin to circumvent Argentina’s financial restrictions. Bitcoin is a decentralised digital currency that provides a high degree of transaction anonymity. Much media attention has been focused around its use as the de-facto currency of the so-called ‘dark web’. In Argentina, however, it also plays an intermediary role; holders of US dollars convert them to Bitcoins, which can then be bought and exchanged online for pesos at the blue rate. This remains something of a gamble, however, as it’s unclear whether Argentine pesos or Bitcoins will be the more stable long-term currency.
From a trends and futures point of view, the Argentine blue dollar is an interesting case study. Like M-Pesa, the Kenyan phone-based money transfer service that was born out of the lack of an accessible banking infrastructure and the introduction of mobile technologies, it proves the old adage about necessity being the mother of invention.
It also provides indications of the future direction of the payments sector in general, with more fluid, peer-to-peer exchanges facilitated across a greater range of channels, using a broader range of currencies while dis-intermediating traditional providers.
Consumers in Europe and the US are not currently facing the same stark problems with stabilising their savings as the Argentinians, or the logistical issues involved with transferring money in Kenya. But some of the trends point in this direction: The distrust of banks, the growing preference for dealing directly with other consumers, the dislike of perceived-to-be-unfair fees and the uptake of new technologies could well combine to create more disruptive innovation around payments in the richer economies.
The picture at the top of this post comes from the Language Lens blog, which has a brief history of the blue dollar. It is used with thanks.