What is happening to the dollar in Argentina?

To understand what is happening to the dollar in Argentina, we need to know a little bit of our history.

The first exchange controls.

In September 1931, the implementation of the first exchange control was part of initiatives aimed at counteract the impacts of the 1930 crisis on the Argentine economy. Until then, the export of meat and grains had provided the necessary foreign currency for the functioning of the national economy. The abandonment of the gold standard by England and the consequences of the devaluation of the pound had put countries under the influence of Great Britain – such as Argentina, at that time – faced with the need to take urgent measures.

On October 3, 1931, the headlines of the newspaper “La Nación” highlighted: «A real price is going to be obtained for the dollar.» In addition to limiting access to foreign currency, Jóse Félix Uriburu’s government did not follow the pound devaluation and instead linked the price of the peso to the dollar and the franc, two currencies that still took gold as the standard. An official source suggested that opting for exchange control had its origin in the «disorienting effect of psychological factors, alarmism and confusion» generated by «capital flight» (“La Nación”, 10/10/31).

Dr. Adolfo Casal, president of National Bank, declared to the newspaper “La Prensa” the following day that the control sought to «neutralize the disturbance factors without disturbing exports and legitimate operations.» As at the present time, he added, «supply and demand».

Local history of a global currency.

The international monetary history of the second half of the twentieth century had the US dollar as the  undisputed protagonist. After World War II, victory on the battlefields and in the field of industrial development was reflected in the supremacy of the American currency in international monetary relations. The intergovernmental agreements sealed in July, 1944 at Bretton Woods decided the foundation of the World Bank and the International Monetary Fund (IMF), at the same time that they established the hegemony of the dollar. The United States currency worked, from then on, to establish prices, negotiate transactions in the world market and grant credits to countries and private companies. Nations considered the dollar a value as reliable as gold, and this was reflected in the composition of their central banks’ reserves.

The balance achieved after the war, however, would not last forever. Twenty-five years later, the United States decided, unilaterally, to end the parity between its currency and gold.

The history of the popularization of the dollar it’s parallel to the history of inflation.

Our look at both historical series consists of connecting them by showing how identifying inflation as a problem was one of the leverages for the US currency to become popular. In this sense, the history of the popularization of the dollar is also the history of the metaphor that speaks of a currency as a «refuge», without which part of the history of inflation in our country could not be narrated.

The value of the US currency integrates the basic information communicated by the Argentine media. Especially in times of currency turmoil. Every morning, they tell us, the first thing we need to know is the temperature, the traffic condition and the price of the dollar. Essential data for the everyday life in the big city.

The dollar is that abstract number with which we start the day, but it is also an object; concrete and known. According to popular wisdom, having a green bill in your wallet brings good luck. But you don’t need to have ever bought a dollar or carry one to be familiar with its aspect. With the passing of the twentieth century, in these pampas, so far from the lands he once ruled, the effigy of Washington, a regular illustration of advertisements and news, has become popular thanks to publicity and the press.

Each currency crisis places Argentine society before an abyss that threatens to open up and devour us. With the frenzy of days, weeks or months of collective and agonizing attention placed on the exchange market, it is not just the economy that is creaking. During this period, the press, economists and politicians repeat a question that worries the whole society: Why is the dollar keeping Argentines up? The question never seems to have found an answer to the height of the circumstances. This has been recorded, for some decades, by its cyclical return.

I asked and answered myself in a second, if people really love the dollar and the answer is a resounding NO. What we Argentines love is not the currency itself but the «reliability» of that currency. I really know that I am not the only person who would love to trust the peso or a currency that is reliable without so much volatility and is a haven for savers. The real problem is not the dollar itself but the distrust that the peso generates in us, the constant devaluations and indiscriminate printing of our currency causes its increase, it’s less valuable and nobody wants it. I think it is time to stand firm once and for all to seek a solution at the macroeconomic level. And I am sure that the way is not to force us to have and save in pesos and devalue ourselves every month. Nobody wants to have a currency that today is worth one thing and tomorrow is worth much less. It must also be clear to them that it is not a matter of banning the dollar. It is a matter of generating confidence in the national currency and for this they should stop underestimating the population. At once it has to be clear to them that if it is not the dollar, it will make a cryptocurrency or even a physical good. It will always be anything that over time in the medium term does not lose value.

It’s a long road that we have to go through but I sincerely hope that we can wake up and together make Argentina a respectable country.

Dina Maldonado – SOCINCE – Social Information Center.

Additional source from the book «The Dolar, history of an Argentine currency»