How Argentina's youth learned to worry about the peso and love the dollar
Nicolas Videla, like millions of his fellow Argentines, buys U.S. dollars whenever he scrapes enough pesos together and keeps a close eye on the country's volatile foreign exchange rate, galloping inflation and murky political outlook.
Videla is 12 years old. The grade school student's anxiety about the peso is telling in a country where generations have seen their savings wiped out by shock devaluations and rising prices that have forced them to seek shelter in the greenback.
Peso aversion is at the heart of the challenge facing Argentina's incoming government as it looks to douse the inflation that has walloped purchasing power and driven up the cost of its overseas debt. "We talk about the dollar at school. I always ask how it's doing. When my friends tell me it has gotten stronger against the peso they complain because prices go up when that happens," Videla said, seated beside his favorite money changer: his mom.
"When he has pesos he asks me to buy dollars with them. When we talk about finances, he never asks how many pesos he has. He wants to know in dollars," added his mother, Sol Videla. The lack of faith many Argentines have in their currency is understandable. The peso has lost about 37% of its value against the dollar this year after tumbling even faster in 2018. One dollar is worth 60 pesos, versus around 10 pesos at the end of 2015 when now outgoing President Mauricio Macri came to power.
His successor, leftist Alberto Fernandez, will take office on Dec. 10 with annual inflation running at above 50% and knife-edge talks with creditors and the International Monetary Fund (IMF) on the horizon over $100 billion in sovereign debt. Fernandez has said he will roll out a "social pact" to strike agreements with businesses, employers, consumers and service providers to help control prices.
It won't be easy. Lack of confidence in the currency has almost become part of people's DNA after decades of cyclical crises with a weakening peso in turn stoking inflation. "Argentines simply do not trust their currency. They have been burned too many times," said Alberto Bernal, chief emerging markets strategist at XP Investments in New York.
In response to a plunge in the currency earlier this year, Argentina's central bank was forced to roll out tough controls to preserve dollar reserves, including a $200 per month cap on dollar purchases through banks. 'EVERYBODY THINKS IN DOLLARS'
Many Argentines use the pesos they earn to pay daily expenses and buy dollars with what is left at the end of the month, turning the greenback into a de facto benchmark currency used for major purchases such as real estate. Every time that political turbulence or a sovereign default scare hits business confidence, the peso's value falls. Sellers of goods and services charge more in anticipation of higher business costs and to keep buying dollars. This is inflation Argentina-style and shows no sign of abating.
"Parents are telling their kids that keeping pesos in their pocket means being able to buy less tomorrow than they can today," said Argentine economist Roberto Cachanosky. "So there's an idea being reinforced that if you need a currency that will keep its value, the peso doesn't work." Ask 13-year-old Gadiel Goldestein, who has already seen enough to put him off the local currency.
"Everybody thinks in dollars. Nobody has confidence in the peso," Goldestein said in an interview joined by his parents, brother and grandfather, the family patriarch who moved to Mexico after Argentina's 2001 economic meltdown and now only comes back to visit. A fan of storied Buenos Aires soccer club Boca Juniors, Goldestein absent-mindedly rolled a ball between his feet as he spoke with a reporter in the family's backyard. His 15-year-old brother, Ian, meanwhile lamented his dwindling purchasing power.
"Last year I spent 100 pesos to eat lunch at school everyday and there was money left over. This year I have to take 250 pesos for the same lunch," he said. Since the mid-1900s, when President Juan Peron and his wife Evita became icons of free-spending Argentine populism, governments have spent more than they collected, undermining the peso, which has lost around 85% of its value against the dollar since the end of 2015.
Was there ever a time when confidence in the peso was strong? Goldestein's grandfather Manuel, 84, has to think back before answering: "They say that when I was a little kid, there was a time. But I was too young to know anything about that, and we didn't have any money anyway."
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)
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