海角大神

More than a decade after Argentina鈥檚 default, the South American nation still suffers from a crisis of confidence in its own currency, highlighted by the middle class's panic over the government鈥檚 clampdown on their access to US dollars.

The American currency is seen as more stable, and therefore more desirable for savings, than the inflationary peso, but the government is working to keep dollars in its own coffers in order to service its debt.

The currency controls implemented by President Cristina Fern谩ndez de Kirchner鈥檚 administration have been largely sparked by the government鈥檚 reliance on the Central Bank to lend it money to pay creditors 鈥� an unusual relationship initiated in 2010 due to the country鈥檚 continued exclusion from international markets since the 2001 default that ruptured its reputation abroad.聽

鈥淎rgentina has not done enough homework to be able to participate in international capital markets,鈥� says Federico Thomsen, an economic analyst who advises foreign investors. 鈥淭his is where there鈥檚 no relationship with the IMF [International Monetary Fund]. Argentina cannot comfortably issue debts abroad without legal obstacles and there aren鈥檛 many domestic lending options.鈥� 聽

As recently as last week, US President Barack Obama was calling for Argentina to repair its relationship with the IMF. The country mainly borrows money from its national pension fund, which it nationalized in 2008, alongside the central monetary authority. Lenders typically require their repayments in an international currency.

At the end of May, the tax office (AFIP) introduced a series of hoops that residents will have to jump through in order to travel abroad with foreign currency, in an attempt to keep dollars in the country. Argentines are finding that everyday requests to change pesos into dollars, which AFIP also needs to approve, are also being refused. This follows controls in April that stopped peso account holders from withdrawing money from their Argentine bank accounts using debit cards overseas.

The new rules, which are meant to be temporary, have caused uproar among the country鈥檚 mostly anti-government news channels. But the protests, which have seen small but noisy groups taking to the streets of the capital鈥檚 wealthier suburbs, as well as cities such as Mendoza, Rosario, and聽Tucum谩n, show just how deep-seated and complex Argentina鈥檚 relationship with the US dollar remains.

'Easily paranoid'

A long history of economic mismanagement has done nothing to quell unease in the domestic currency, starting with the mega-devaluation of the 1970s known as 鈥榚l Rodrigazo鈥� through to the corralito of 2001, an economic meltdown which saw bank accounts frozen and life savings held in dollar accounts suddenly converted into heavily devalued pesos.

Since the 1990s, the peso had been pegged to the dollar. At the time it was easy to change local money into dollars because the value was the same, and people started saving in foreign currency, anticipating another downturn in fortunes.聽

With the 2001-02 crash, Argentines took to the streets of Buenos Aires and then president Fernando De La R煤a, unable to cope with the unrest, fled from the roof of the presidential palace via helicopter. Despite the economic recovery and recent boom years, the psychological scars from the period are still evident.

鈥淒ue to what happened in 2001, people easily get paranoid and everyone wants to go out and buy dollars,鈥� says Celeste, a 27-year-old professional from Buenos Aires who, like most people interviewed, didn't want to give her surname.

鈥淎FIP is now blocking 100 percent of my attempts [to get dollars]. I went to the bank recently and I couldn鈥檛 even buy ten dollars,鈥� Celeste says. She is now considering the d贸lar blue, the illegal exchange market, at a less favorable rate.

'Full peso economy'

The main reason the dollar continues to be a must-have savings currency is due to high domestic inflation, estimated at around 20 to 25 percent by private consultancies (although the Argentine government鈥檚 national statistics body, INDEC, puts the figure closer to 10 percent).

Journalist Adri谩n Murano recently wrote an article for local current 鈥╝ffairs magazine 痴别颈苍迟颈迟谤茅蝉 about the country鈥檚 need to move to a full peso economy 鈥� an idea promoted by the government as it has ramped up controls. 聽

In a bid to get the population thinking in local currency, President Fern谩ndez de Kirchner stated last week that she would change her savings, thought to total over $3 million, from US dollars into pesos.

But Mr. Murano isn鈥檛 sure politicians are going about the pesoization of Argentina鈥檚 economy in the right way.

鈥淕enerating a peso culture isn鈥檛 just about telling people they need to start thinking in pesos,鈥� Mr. Murano says, 鈥渂ut more about generating the economic conditions for the peso saver. What the government is doing is trying to create the culture before the conditions are there.鈥� Until inflation is brought under control, confidence will continue to falter.

Andr茅s Tarrio, 35, from the Coghlan neighborhood, understands up to a point why the government wants to act. 鈥淲e鈥檙e so used to thinking in dollars, after so much time, that it would be really hard for people to change,鈥� he says. 鈥淚 think the only way is to force people to make that change. But there are [different] ways of implementing this.鈥�

Overhauling the dollar addiction won鈥檛 be easy, given the US currency鈥檚 well-established position. The North American money is used in everything from plane ticket purchases (amended in the last few days by state carrier Aerol铆neas Argentinas) to real estate.

鈥淲e bought a piece of land for $500,000 the other day,鈥� explains Daniel, 60, an architect working in the well-healed Buenos Aires neighborhood of Belgrano. 鈥淲e spent about two hours in the bank counting and sorting the money. Now multiply that by four or five if we start having to pay in pesos. We鈥檒l be spending the day there.鈥� Argentina has a largely cash-reliant system, and large payments in cash are not unusual.

The sudden changes, coupled with a lack of communication on the part of the government, threaten to panic a population that can easily get jittery about money. Argentines can be fatalistic about the future and some say the country has tended to crash in ten-year cycles, which does little to allay fears.

Although few commentators believe Argentina is heading for a repeat of 2001, the economy in the first quarter of 2012 has certainly slowed in comparison to the 8.8 percent growth it enjoyed last year.

Not to be banked on

Argentines may want dollars but the harsh lessons of the past mean cash often remains outside the formal economy because savers hoard it rather than keeping it in the system. As banks have a reputation for letting the population down, many would rather keep savings under the bed, or in a safety deposit box.

鈥淚 know that the dollars in my box are actually there,鈥� says Franco, an IT worker who lives near the city center. 鈥淚f you have a bank account in dollars your money doesn鈥檛 exist 鈥� it鈥檚 just virtual money.鈥�

Gaby, who describes her background as lower middle class, also has a security box. She says she鈥檚 only able to save 鈥� not an option for much of the country 鈥� because she鈥檚 a professional without a family. 鈥淚 don鈥檛 make any interest on the money I keep in a safety deposit box,鈥� she says. 鈥淏ut it鈥檚 safe there. I think everyone is going to start asking for one soon.鈥� Renting the safety deposit box costs her close to $450 a year.

The Central Bank estimates that around 10 percent of the population puts savings aside in foreign currency, although numbers are hard to predict accurately. Dollar flight 鈥撀爓hether depositing abroad or using local security boxes 鈥撀爉ay be a relatively small number of the population, but the cash amounts are growing. Some $21.5 billion left the formal economy in 2011, according to the monetary authority, almost double the figure of the previous year.

The dollar controls have done nothing to stimulate investment and any future stagnation is likely to have the population running for the tried and tested security blanket of the dollar 鈥� if it can get it.

鈥淭he trends right now aren鈥檛 looking good,鈥� says Silvina Vatnick, president of the Centre for Financial Stability, headquartered in Buenos Aires. 鈥淚t鈥檚 going to be a rough time.鈥�