Argentina (A Reprise)

Back Out In The World

Argentina (A Reprise), Back Out In The World

It has been more than two years since we officially gave up and ended our journey around the world. We had planned to travel for eighteen months but were forced to halt our adventure after only nine months due to COVID-19. Our stay in Taiwan, which had been intended to last for three weeks, was extended to three and a half months due to the pandemic.

Since that time, a lot has happened (none of which included writing about our time in Asia or reflections on our trip as a whole – I have many half-completed articles sitting unfinished). We moved to Phoenix (Arizona), have had a variety of career changes, and we had a baby! However, our itch to travel never went away (and neither has my saltiness about COVID preventing us from going to South Korea, Japan, Singapore, Australia, and New Zealand as we had intended).

When Zelda was born we were presented with a unique opportunity- Mollie was on parental leave, and I had some latitude to take some time for parental leave and vacation at my job as well. The opportunity to travel was there. That being said, traveling with a baby is tough; or as the pediatrician answered when we asked if we could take Zelda abroad– “it is safe for her to travel, but good luck.” It was tempting to take the lazy route and opt to stay home– it is challenging enough to care for an infant under the best of circumstances. However, my grandparents in Argentina are into their eighties and it is hard for them to travel. Despite them having plans to come to the US later this year, I did not want to risk the possibility of them having to cancel their plans.

We decided to step out of our comfort zone and made the effort to visit my grandparents in Argentina, although we couldn’t help but fantasize about seeing other places we have yet to explore. Our commitment to one-bagging, which we had done before, remained unwavering. The thought of one-bagging with a baby appealed to me more than Mollie, but we both agree that it was a good choice, especially considering the current (disastrous) state of luggage handling. We each carried the same Tortuga Outbreaker backpacks (45L and 35L) that we had previously used during our travels. Additionally, we brought along a 22L Ministry of Supply x Aer backpack for Zelda’s belongings and a Doona travel stroller that converts into a car seat, which has proven to be a practical and phenomenal addition to our travel kit. As always, traveling with only a carry-on proved to be effective and advantageous.

We were lucky and managed to get fantastically cheap business class flights to Buenos Aires utilizing frequent flier points, which was the only way Mollie would ever consider a ten hour flight with a two month old baby. Even so, the challenge was daunting. Our intention was to be in Argentina for about four weeks, though we did not have a return flight. We were hoping and banking on a similarly priced flight home would appear if I kept regularly checking for flights, which eventually occurred. Flying with Zelda went as well as could be expected; thankfully only one of us threw up on the flights– it was me. That being said, Mollie was the one with the unenviable and difficult job of keeping Zelda happy.

Coming back to Argentina simultaneously felt like we had never left, yet completely foreign and new– a country so different from our own, but so familiar to us as a place we had (effectively) lived before. Looking out the window on the drive from Ezeiza airport into the city of Buenos Aires I experienced deja vu. This was the same drive I had made many times before, but through new eyes. As I made the same journey my mother had made with me as an infant, I realized that I was now passing on this experience to my own daughter.– same place, same age, new generation.

As long as I remember, Argentina has been in some state of utter collapse: the government is corrupt, the economy is in disarray, inflation is spiking uncontrollably, the poverty rate is rapidly increasing, living conditions are deteriorating, etc. Yet somehow things here appear to just… continue on. People live here and survive as normally as one can in a place where banks offer 50% interest on savings and it is still nowhere near enough to beat back inflation. Each time I visit, it feels like the situation cannot possibly get any worse, and yet it always does. It is as if Argentina exists in a perpetual state of limbo, teetering between impending disaster and a kind of tenuous stability. Despite the dire circumstances, life here goes on, and people seem to find a way to carry on as best they can.

Argentine Fiscal Shenanigans

What sets each visit apart, however, is the discovery of some new economic hell and absurdity has been unleashed upon its citizens. One of my favorite incidents was years ago when the Argentine government took out substantial loans. This created a massive debt to foreign creditors. Rather than repay the loan as expected, they seemed bizarrely perplexed at the notion of ‘paying something back’ and opted to default on their debt instead. It seems that the government did not comprehend the word ’loan’, which it chose to interpret instead as ‘gift’. They were furious that they were being asked to repay their debt and launched a campaign of insults, claiming their debtholders were “vulture funds”, and refused to pay them under any circumstance. The government claimed that 93% of their debt had been restructured into a payment plan that would pay back the creditors cents on the dollar, since their debtholders had lost all hope of being paid back in full. Even then, the Argentine government claimed it was not fair that they would deign to even pay back the full amount on the loan to the remaining 7% of their debtholders. At one point this led to a hilarious situation in which a hedge fund repossessed an Argentine Navy vessel in Ghana. To the best of my knowledge, it was the only time in history that a government military vessel had been repossessed by a private entity over outstanding debt.

The current situation in Argentina is equally absurd– the Argentine government has ‘determined’ an official exchange rate for the Argentine Peso to the US Dollar. It is not the first time they have done so, and on its face it does not sound ridiculous. A hint as to how it is going though– Sri Lanka did the same thing, and they are currently… less than exceptional. This ‘official’ exchange rate however is not bidirectional, which is to say, you can take $1 USD and trade it for 125 pesos, but you cannot take 125 pesos and trade it for $1 USD. In fact, there is no amount of pesos you can offer the Central Bank of Argentina in order to get dollars (though there was an exception that will be discussed later).

The problem with this tactic should be obvious, and I will elaborate upon it shortly. Under more typical ‘synthetic’ exchange rate implementations, the exchange rate will be bidirectional against foreign currencies, and a central bank will utilize foreign currency reserves in order to offset the imbalance and prop up the currency, then make up the difference through exports where it can earn foreign currency. This is a system that incurs a lot of risk, but can be stable as long as things continue on as normal (looking at you, Sri Lanka).

Using the Argentine method you can only buy pesos with dollars, but there is no way to buy dollars with pesos. This leads to two glaring questions, 1) How does the currency market balance out? 2) How do you import any goods if you have no way to access foreign currency?

Starting with the first question– one which I expect many readers can guess the answer to- when a government tries to impose a ban on something the market has a lot of demand for, supply appears in the form of a black market. Here in Argentina it is less of a black market and is known as “Dolar Blue”. Go just about anywhere a tourist might go, and you will likely be approached by someone offering to exchange money at unofficial (market) rates. Initially this does not sound so bad on its face, as it enables average people to exchange their money at market rates, but these exchanges have far larger margins than a legitimate currency exchange would have. Additionally, because it is a smaller exchange and is more reliant on foreigners wanting to exchange currency rather than normal markets, it often leads to pesos rapidly falling in value as Argentines are desperate for dollars and not enough tourists are replenishing the supply of dollars. To provide context, when we arrived here in early June, the official rate was 1:125 (USD:ARS) and the Dolar Blue was 1:250 (USD:ARS). Now (almost three weeks later) the official rate is 1:129 (USD:ARS) and the Dolar Blue is 1:350 (USD:ARS). The only upside of this is for foreign tourists who benefit greatly by being able to double or triple the value of their money in a place which is already quite affordable, though it comes with the downside of needing large wads of cash for every single transaction in a country where crime is at an all time high.

The second problem is more complicated and relates to the primary reason the government would implement such a system. I will begin with the benefit to the government before addressing the flaws in the plan. Argentina exports a great many goods, and governments typically benefit from exports in two ways- taxing the goods and building foreign currency reserves. Argentina’s government felt this was not enough and wanted to REALLY take advantage of their exporters.

Let us say you are a soy farmer in Argentina and would like to export your soy. You would like to export $1000 USD worth of soy to buyers in China. The Argentine government hits you with a 33% tax upfront (yes, it really is that high), so you have to pay the government $41,625 ARS (since this operates at the 1:125 exchange rate), thankfully in market-value dollars it is more like $139 USD (utilizing a market exchange rate of 1:300). Still though, now your exports go to your buyers and they send you the $1000 USD. However, the Argentine government takes that money, sticks the dollars in their foreign currency reserves, and pays you at a rate of 1:125, leaving you with $125,000 ARS minus the $41,625 you already had to pay them, which equals $83,375 ARS total revenue. Unfortunately, when you convert your cash to a stable currency at market rate, what you actually have is $278 USD. This feels decidedly unfair- after all you sold $1000 worth of goods, but the government ended up with $722 USD and you ended up with $278 USD. Unless your profit margin is well over 70% then you LOST money by selling your goods. However, the Argentine government is feeling pretty good about the transaction. After all, if this had all occurred at market rates you would have ended up with $777 USD and the government would have only ended up with the $333 they earned on the (frankly insane) taxes. By playing shenanigans with currency manipulation they were able to more than double their money! …At your expense of course.

It should be patently obvious that such a system is not sustainable and no one could feasibly run a business that way. So in a country with as much corruption as Argentina, what does a poor soy exporter do? Well, they have their trucks drive to the border and bribe the customs agents, thus bypassing both the 33% tax AND the currency exchange, leaving the exporter with 100% of the revenue (minus the bribes) with the added benefit that the cash is already in USD rather than pesos to be converted. If enough people do this the government ends up making LESS money than they would have had they simply operated in good faith to begin with, but god forbid Argentina’s government utilize common sense.

Having discussed exports, we should now consider how imports function in this circus of an economic system. For a little while the government said they would honor importation enforced at the official rate. This was great news for importers who would not have to exchange their pesos for dollars at market rates and would be able to import goods quite cheaply, backed by the Argentine government (which hoped to cover the costs with the aforementioned export scheme). Now, you might be thinking that this situation is ripe for exploitation, and you would be correct, though likely not in the way you would expect. I imagine you would expect importers to buy goods at ultra cheap prices (subsidized by the government) and simply sell them at normal prices, thus making a hefty profit.

This seems like a perfectly reasonable way to take advantage of a unique situation, but Argentina is anything but a reasonable place. If I may, I would like to remind you of the rampant and endemic corruption in an effort to see if you can guess what ended up happening… Let us conjure up yet another example.

Let us say you are an electronics importer in Argentina and would like to import a laptop valued at $1000 USD from the US. You could simply pay the government $125,000 ARS (calculated at 1:125) and receive the laptop, benefiting from the fact that the money you paid for the laptop is really only worth $417 USD (calculated at 1:300). However, you realize the government has only a ballpark idea of what a laptop is worth, so you ask the seller if they could please write $2000 USD on the invoice and you will pay them an extra $100 USD for their trouble. They of course oblige, so now the government has you pay them $250,000 ARS ($2000 USD at 1:125) and they send $2000 USD to the seller. The seller then sends you the laptop as well as $900 USD (since they only kept $1100 USD), which you can convert to $270,000 ARS on the Dolar Blue.

To revisit the math here- you paid the government $250,000 ARS, and you ended up with a laptop and $270,000 ARS. That means you got a laptop and $20,000 ARS for FREE. Unsurprisingly, you and everyone like you wants to take advantage of this free stuff/money hack before it inevitably gets shut down.

After a while the Argentine government did catch on as their foreign currency reserves were rapidly depleted, and was rightfully upset about a few importers (i.e. a great many importers) ruining their subsidized imports for everyone. In response, they announced there would be no more dollars sent abroad for imports, telling importers to “figure it out” despite the fact that there is not really a simple way for importers to send dollars abroad otherwise. This action essentially ground imports to a halt, leading to price spikes on goods already in the country, dramatically exacerbating the existing hyperinflation.

Eventually the Argentine government decided they would enable payment of dollars to sellers abroad, but that any foreign good that requires dollars to pay for (i.e. ALL OF THEM) would be subject to a 75% tariff. This includes some absurd products such as digital video games that simply get downloaded, so a game that originally cost $50 USD now costs $87.50 USD in Argentina. It really is shocking that such a robust and well thought out economic system is not thriving.

A simple fix to all the aforementioned idiocy would be to just float the currency and allow the market to value it, but the current populist government believes that would be ceding control of their currency to ‘foreign interests’ and would also end their scheme of scamming Argentine exporters; or as the rest of the world refers to having a market-valued currency: normal, sane monetary policy.

Back To The Trip

Aside from the effects of current economic and political conditions in Argentina– which are unfortunately impossible to not notice given the rampant poverty, homelessness, and crime– Argentina has a lot to offer. The cuisine in Buenos Aires is just as good as I remember. Due to both the quality of food, plethora of options available, and absurdly cheap prices, we ate out for every single meal except for one: which was fresh-made pasta, marinara sauce, and grated parmesan that we had purchased from a nearby pasta shop and prepared at home (which hardly counts as cooking at home).

It was a joy being out of the Phoenix heat; the temperature each day was in the 50F-68F (10C-20C) range, of which we took full advantage. Thanks to Buenos Aires being an exceedingly walkable city (as opposed to ultra car-centric Phoenix) we averaged about 7 miles (11 km) per day. Zelda definitely seemed to enjoy all the walking as she opted to do almost all her napping in a moving stroller. However, all of us had to adjust to the realities of life in Argentina. Whereas back home we kept Zelda on a fairly regular nap, feeding, and sleep schedule, we needed to be far more flexible in Argentina as we were often on the go or operating on someone else’s timeframe (such as when the extended family was having get-togethers). Additionally, dinnertime in Argentina begins no earlier than 8:00 PM, though 9:00 PM is far more typical. This was not simply a matter of preference– most restaurants did not actually open for dinner until 8:00 PM. This meant that rather than going to bed around 7:00-8:00 PM like she would at home, Zelda was relegated to sleeping in her stroller during dinner, then going to bed once we got home– thankfully she did not seem to mind.

I will say it was good for us in some ways, forcing us to be less rigid about timings and doing our best to just parents as best we could with the given situation. I am convinced that it is vital for parents to live their lives in coexistence with their children, not in subservience to the lives of their children. The added benefit of always being out was Zelda getting to experience something brand new and exciting every day. Every day was a new place, a new adventure, something to explore. Had we stayed home, summer in Arizona usually means existing almost exclusively in your house aside from shopping runs or other errands. I am certain that new places, cultures, and experiences are far superior to a child’s development than would be staying at home in an endless routine loop.

While we were eager to explore and embrace our adventurous spirit, the primary reason for our visit to Buenos Aires was for my grandparents to meet Zelda. Consequently, we wanted to limit our time spent outside of the city. Additionally, it would have been daunting to take Zelda to more challenging environments elsewhere in the country. We did consider going to Mendoza, which would have been our first time, but instead opted to go to Uruguay for a little less than a week instead.

We took the ferry (the fastest ferry in the world, in fact) from Buenos Aires to Colonia del Sacramento to celebrate Mollie’s birthday, just as we had three years prior. We then rented a car and drove to Montevideo, which felt like a mini Buenos Aires if you capped all the buildings at approximately four stories high. From Montevideo we drove to Punta Del Este, a cool resort town established on a peninsula in Uruguay. It was the low season since we were in the dead of winter. This meant the town was far emptier than it otherwise would be, and it was too cold to spend time on the beach, but it was a fantastic experience nevertheless.

Update: April 2023

I originally wrote this article over the course of July-August 2022, which was during and immediately after our trip. Despite the length of the article, I clearly did not finish talking about our trip– what we did in Punta Del Este, what we did when we got back to Buenos Aires, and the trip back to Phoenix. Unfortunately life just became quite busy, and the priority of finishing this article fell below other tasks.

I considered trying to finish the article by trying to recollect my memories of that time, but I feel like the value of doing so would be limited. I have instead opted to leave the article in its current, unfinished state. I went back and copy edited, and that is the version you just read above.

We are on the verge of another trip to Argentina– with Zelda one year old and Mollie five months pregnant, we will be spending six weeks there. My intent is to write a similar article to the one above about our time there, and we will see whether or not I succeed. In the meantime, I know someone who is excited to go back…

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