Buenos Aires — Argentina’s government on Tuesday launched two more official exchange rates for the US dollar, bringing the total operating in the country to 15.
The new rates are the so-called ‘Qatar dollar’, due to the proximity of the Qatar 2022 FIFA World Cup, and the ‘Coldplay dollar’, due to the English band’s upcoming concert in Buenos Aires in November.
Both of the new exchange rates will come into force from October 12.
The new exchange rates come 10 days after Economy Minister Sergio Massa said it is “time to take care of the dollars,” and the measure is aimed at increasing the price of foreign currency that is being drained through expenditure on outbound tourism and on shows featuring international artists and athletes.
The new exchange rates will be in force “until further notice,” the government said.
The ‘Qatar dollar’
The government’s new exchange rate implements a price of 300 Argentine pesos per dollar for those who spend more than $300 per month with a credit card outside of the country.
Based on August data, the measure would affect some 200,000 people in the country, 7% of the total number of individuals who spent in foreign currency.
However, that 7% accounted for 81% of the total amount transacted in the eighth month of the year ($263 million out of the $322 million spent with cards in foreign currency).
This would imply that, for 93% of those people - that is, the 2.8 million who monthly spend no more than $300 - the current exchange rate for the consumption of services such as Netflix and Spotify would be maintained, and which is the price of the official dollar plus the so-called ‘tax for an inclusive and solidarity-based Argentina’ (the PAIS tax), and the 45% withholding tax.
In order to reach that 300-peso US dollar rate, the government has taken into account a 25% tax rate on personal property, meaning that the final amount will be the sum of the exchange rate of state-owned bank Banco Nación (150 pesos) plus the PAIS tax (30%), and income tax (45%) and the new personal property tax (25%).
This new 25% tax will also be applied to purchases of luxury goods abroad.
The ‘Coldplay dollar’
With respect to the payment for artistic and sporting events abroad, a PAIS tax of 30% is added to the value of the official dollar. Thus, the value of the currency will increase to 195 pesos, while artists and athletes performing in the country will be eligible to receive the tax withheld.
The impact on the economy
However, according to Sebastián Menescaldi, director of economic and political consultancy Eco Go, the new regulations creating new exchange rates does nothing more than generate new inefficiencies for the Argentine economy.
“All these measures were patches, which may help to take care of reserves, but at the cost of generating new inefficiencies. In general, what they caused were higher costs for consumers; it makes life more difficult for ordinary citizens because they do not have reference prices. And that makes you spend more for something that is not worth it, or consume less”, he said.
15 exchange rates
The need to apply strict control over the outflow of US dollars, in view of the shortage of reserves in Argentina’s central bank’s (BCRA) coffers, led to the implementation of the new exchange rates, and which now total 15.
Multiple exchange rates are not exclusive to the current administration, however. During the second term (2011-2015) of the Cristina Fernández de Kirchner (and who is the current vice president), parallel exchange rates, such as the blue dollar, the MEP dollar or cash liquidation, were implemented.
With the investiture of former president Mauricio Macri in 2015 and the elimination of exchange controls, the parallel exchange rates disappeared. However, in the last quarter of 2019 the exchange rates re-emerged with the implementation of a new exchange rate ceiling to contain the strong outflow of dollars from banks following the primary elections.
The Frente de Todos coalition, which makes up the current government, took office in December 2019 with an exchange rate gap of 10%, with the official dollar at 62.91 pesos, while the blue dollar was traded at 69.25 pesos.
By then, there were already no fewer than seven different rates for the currency: The official retail dollar; the wholesale dollar; the agricultural dollar (the quotation of which consists of subtracting withholdings from the wholesale dollar price); the future dollar (whose contracts are agreed in MAE and Rofex); the blue dollar, which is traded on the informal market; the MEP dollar, which arises from the purchase and sale of securities; and the dollar with settlement, whose operation is similar to that of the MEP dollar, but with settlement abroad.
The ‘Solidarity dollar’
Two weeks after taking office, President Alberto Fernández’s government passed into law a bill that declared an economic emergency in Argentina. In doing so, it put into effect the so-called ‘Solidarity Dollar’, which consisted of adding a 30% tax to the purchase of foreign currency for savings or for expenses abroad paid by card.
With the arrival of the PAIS tax, the exchange rate jumped to 81.90 pesos per US dollar.
Less than a year later, in mid-September 2020, and in the middle of the pandemic, the government applied an additional 35% withholding tax on dollar exchanges for card expenses abroad, and which was added to the PAIS tax, pushing the exchange rate to 130 pesos per US dollar.
The ‘Cedear dollar’
In January 2021, a new rate was introduced, the so-called Cedear dollar, referring to Argentine deposit certificates, or Cedears, which allow investment to be carried out from Argentina and in pesos in the shares of large companies. This rate had been available since 1997, but took on importance recently as it allowed for the possibility of accessing an unlimited amount of legal dollars.
In 2020, the volume traded in these instruments increased eightfold in response to the search for foreign exchange hedging and portfolio diversification.
By 2021, the volume had increased by 318% compared to the previous year, while by mid-2022 anañysts were already were already reporting a 230% increase in the volume traded compared to 2021.
The ‘Senebi dollar’
In mid-2021, the government, concerned about the flight of dollars involved in keeping the dollar-peso rate stable, implemented an operation whereby it sold peso bonds and repurchased them using dollars from its reserves to limit the rise of the MEP dollar.
But this operation was becoming very costly. By November of last year the market estimated that it had required the central bank (BCRA) to shell out at least $2.4 billion, and the National Securities Commission (CNV) asked companies listed on the stock exchange to “withdraw” from that segment in which the central bank was operating.
Thus, a new rate was born: the so-called ‘Senebi’ dollar, Senebi being an acronym of the bilateral negotiation segment. This allowed traders to negotiate the purchase and sale of securities without putting pressure on the “official” price of the currency.
The ‘card dollar’, the ‘savings dollar’, and the ‘soy dollar’
In July of this year, within the framework of the strong outflow of foreign currency due to tourism, the government determined that card expenses abroad would be subject to a withholding tax of 45% instead of the original 35%. Thus, the ‘solidarity dollar’ now had two variants: the savings dollar, which maintained the PAIS tax plus the 35% withholding, and the ‘card’ dollar, whose withholding increased by 10 percentage points.
In September, with the purpose of adding foreign reserves, the government launched its export incentive program, which consisted of recognizing the soybean quotation of 200 pesos per dollar exported.
Thus, thanks to the so-called ‘soy dollar’, the central bank was able to buy $4.96 billion during September, while soybean producers raised $8.12 billion.
Crypto and the ‘tech dollar’
Another rate to emerge in recent months is that of the ‘crypto dollar’, which consists of accessing foreign currency through crypto assets.
However, there is also the so-called ‘tech dollar’.
There is no differential exchange rate in Argentina for those who export technology services, or who are engaged in the so-called knowledge economy.
In September, the government announced the possibility that companies making investments of more than U$3 million would be exempt from paying 20% of the foreign currency in the official market. In addition, companies that increase their exports in 2022 will have free availability of 30% of the foreign currency to be used in remunerations.
Finally, other exchange rates arising from transactions in the informal market are referred to as the ‘friendly dollar’, which consists of splitting the difference between the purchase price and the sale price of the currency, or the ‘small dollar”'
‘The latter was created as opposed to the ‘big-face dollar’, as the bills issued by the Federal Reserve of the United States since 1996 are called, and which have enhanced security measures.
So, what’s the current exchange rate?
- Following the end of the export stimulus program, the ‘soy dollar’ returned on Tuesday to levels below 100 pesos, becoming once again the cheapest US dollar on the market
- The wholesale dollar closed Tuesday at 150.69 pesos
- The official retail dollar climbed to 157 pesos, according to Banco Nación
- The savings dollar was traded at 259.05 pesos
- The retail card dollar and the blue dollar traded at 280 pesos
- The MEP dollar traded at 288 pesos
- The Cedear dollar traded at above 305 pesos on Tuesday.
