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When I arrived in Buenos Aires in June 2023, holding Argentine pesos felt a bit like burning money. In my first four months, the currency lost more than half its value amid surging inflation.
Argentines, who as a rule save any spare cash in US dollars, warned me to do the same. By October, Javier Milei, the libertarian economist who was running to be Argentina’s president, had declared the peso worth “less than excrement” and pledged to scrap it altogether and replace it with the dollar.
Yet one year into Milei’s presidency, it is the peso, not the greenback, that is having a moment.
A plunge in inflation thanks to Milei’s austerity programme and his continued use of strict currency controls has led the peso to stabilise in both the official exchange market and the black market. That’s after a decade of near-constant depreciation. In real terms, the peso appreciated more than 40 per cent last year — more than any other currency.
For Argentines, this is the latest twist in a long and tumultuous history of currency volatility.
Many local investors are using the shift for profit by engaging in carry trades: taking out loans in dollars, using the cash to buy pesos and collecting the interest rate, which is higher than the rate of dollar loans and the peso’s devaluation.
And while the pain from the economic crisis and austerity measures is widespread, middle-class Argentines are enjoying the fact that peso salaries are now worth more abroad. They have flooded Brazilian beaches and Chilean shopping malls. “Now is the time to go, things are cheaper anywhere but here,” said María Cristina, a teacher from Patagonia.
The experience of using cash pesos while shopping has become less awkward too. Freshly minted 10,000 and 20,000 notes, worth roughly $10 and $20 respectively, have replaced the previous largest bill, which was worth just $2.
Meanwhile, those dollar savings that many here hold are worth less. Tomás, an Argentine friend studying for an MBA, says he realised Milei’s policies could lead his $10,000 savings to depreciate by so much against the peso that he might run out of money for his course. He opted to convert all of his dollars to pesos and invest in inflation-linked term deposits. “It was completely counterintuitive for an Argentine to get rid of dollars,” he says. “But if I’d held on to them [the course] could’ve cost me 50 per cent more.”
While Argentines deftly navigate the new peso panorama, tourists have been caught unawares. Visitors to Buenos Aires find it has gone from one of the cheapest cities in Latin America to among the most expensive, with bar and restaurant bills sometimes exceeding western European and North American levels. In a co-working space I visit, one digital nomad complained to her friend on FaceTime that the food here was more expensive than in Canada: “A pizza is $20!” she exclaimed.
Argentines have little sympathy. “The bargain-bin Argentina of the last few years is what was shocking, not this,” said one CEO. “Your advantage was our disgrace.”
How long the peso’s strength will last is unclear. Milei has pledged to lift currency and capital controls later this year. Economists will be watching to see how much pent-up demand for dollars is unleashed.
There are signs the dollar will play a larger role than before as Milei removes restrictions on its use. Businesses are now allowed to display prices in dollars alongside pesos, though the practice isn’t yet widespread. From this month, Argentines can use dollar-denominated debit cards. Most importantly, a tax amnesty has prompted people to deposit roughly $15bn in savings that were stashed under mattresses or overseas, boosting banks’ ability to offer dollar-denominated loans.
Daniel Marx, a former finance secretary, says Argentine governments would have to demonstrate “long-term consistency” for the peso to really earn everyone’s trust. “Human beings tend to protect what they have,” he says. “And if the local currency doesn’t do that, they will look for alternatives.”
ciara.nugent@ft.com