All exchange gaps are shrinking. All of them? No. The gap between the official dollar and the dollar card remains firm at 60%. It does not grow or decrease, since the card dollar arises from adding to the value of the official exchange rate two 30% surcharges: one on account of Profits or Personal Assets and another for the PAIS tax. So, The official dollar is $1,022 and the card dollar is $1,635. In turn, the MEP is $1,096, 33% cheaper than the card. Or conversely, the card dollar is 49% more expensive than the MEP dollar.
Now that summer is approaching and apparently many Argentines are thinking about traveling abroad because there are “cheap dollar” feeling, The question arises again of how to avoid paying the tourist dollar and, instead, pay for card consumption made abroad with dollar bill.
That could happen. But what has been seen over the last twelve months says otherwise. In September, according to the Central Bank’s foreign exchange market report, “The “Human Persons” recorded net expenses of US$ 470 million, mainly for expenses for travel, tickets and other consumption made with cards with non-resident suppliers”
About those 470 million dollars The treasury charged the 60% surchargedespite the fact that these “human persons” could have saved it by paying the part of the card statement that came in dollars by purchasing the MEP dollar. In the last year, the average monthly card spending in dollars was around US$400 million.
The sale of dollar cards reached US$3,093 million between January and September 2024. The average retail dollar this year is $925 and the card dollar is $1,480. That is to say, for every dollar a surcharge of $555 was charged. The card dollar contributed to the treasury until September, 1.7 billion pesos. If the PAíS tax falls, the treasury would be giving up 850,000 million pesos.
It is curious, in the midst of the historic, and almost always justified, complaints about fiscal pressure, There is the case of a tax that, being legally avoidable, Argentines still pay.
What happened was that a good part of those 470 million dollars were probably the product, to put it simply, of small expenses in dollars, such as subscriptions to foreign newspapers or platforms such as Netflix, Amazon or Spotify. The Central Bank considers that since these are small expenses, consumers do not worry about taking the trouble to:
-suspend automatic debit of the card
-reactivate automatic debit
What analysis does the Central Bank make of this, thinking about next summer and the impact that the spending of Argentines traveling abroad may have on reserves?
“What we see is that there is a significant portion of that $470 million that falls into what could be seen as “transactional.” When the volume increases, people pay for all that marginal increase with their own dollars. In other words, it seems that if you are going to pay for your Netflix, don’t even worry, you pay the balance with pesos and with the surcharges. But if you are going to pay for your vacation, by increasing the volume, you do take the trouble to buy the dollars in the MEP.”
Regarding the impact on reserves, the Central’s view is this: “What comes out of the MEP dollar does not come out of the net reservescomes out of gross reserves.” Today net reserves have a negative sign of between 4,000 and 5,000 million dollars. The gross ones are, positively, at almost US$ 30,000 million.
What does this mean, according to the Central Bank’s view: the use of gross reserves is due to factors that are not controllable by the BCRA or the Government. “You go on vacation wherever and whenever you want. Whether it is expensive or cheap is a subjective question. For an anniversary or a life goal you may be totally inelastic. You save a few dollars, add them to your gross reserves, and take them out whenever you feel like it.”
–And what happens to the net reserves? asked Clarion
–In the case of the use of net reserves, which affects the pesos in the economy, the Central gives you dollars and sterilizes pesos, and this does respond to incentives in a more elastic way. At a let’s say high price, you won’t buy a single dollar from the BCRA. At a price considered low, you only buy those from the Central Bank.
It is likely that the issue “Argentines spending dollars abroad” will generate a strong discussion in the coming weeks, associated with the debate on whether or not there is an exchange rate delay and above all because of the impact on reserves, beyond the distinction between net and gross things they do in the Central. The evolution of the exchange rate in twelve months —The MEP rose barely 27% in the year, compared to an accumulated inflation in that period of 160%–, It only reignites the debate.
In that same period, blank salaries according to the RIPTE index had this movement, expressed in dollars: they jumped from 521 dollars in November 2023 to 979 in September of this year. A “high salary” in dollars, despite the fact that purchasing power, in pesos, is still 5 points below November 2023.
Likewise, you should not be fooled by the salary in dollars. In December 2017, before the start of the crisis that engulfed the Macri government, this same salary was $1,700.
It is not that the issue of consumption in dollars abroad does not concern the Central Bank. But there could be news. Clarionhad reported in August that it was almost decided to increase the surcharge on account of Profits or Personal Assets, to compensate for the total elimination of the COUNTRY Tax, which expires in the last days of December. This version emerged when the tailwind that drove the reduction in the exchange rate gap, the country risk and the strong purchase of dollars by the Central Bank had not yet been unleashed. This week, versions appeared that such a thing may not happen and the card dollar will simply drop in price due to the elimination of the COUNTRY tax. At today’s prices, then, it would fall from $1,635 to $1,328. The definitive answer to this question will possibly be given by the fiscal flexibility with which the Government projects 2025.
But returning to the exchange rate debate yes or no. In these days a phrase from the economist Tomás Bulat circulated; “Those of us who are 40 years old or older and live in Argentina know that after a period of “cheap” trips to Miami, another – much longer – period of vacations in Villa Gesell or Pinamar is coming.”
Will this time be different?