How the fiat black market works in Argentina.

The purchase of USD by Argentinian nationals is forbidden by law. This prohibition created a parallel market (free or black market) for the exchange of physical ARS/USD in a peer to peer way. This led to the creation of a whole industry dedicated exclusively to provide liquidity to the market. That eventually developed into a system where anyone can freely and very easily exchange USD/ARS, without KYC/AML, safely and without any risk of being prosecuted nor paying additional taxes. It doesn’t matter if its illegal because there are actually zero negative consequences due to the illicit action. You can exchange the money in front of a policeman and he can´t nor would do anything. 

Nowadays the aforementioned black market is increasingly starting to deal also with USDT and BTC. It´s quite common to find in any major city -specially in provincial capitals- “cuevas” that can perform the following swaps  indistinctly and with a reasonable fee: BTC / USDT / ARS (paper) / USD (paper).  All of this without any KYC/AML.  

This is possible because the Government has decided to allow it. This contradiction between the law and what the Government actually enforces is very common in the southern country. Given the normative inflation of Argentina there are lots of regulations that are flagrantly violated continuously without any repercussion. As an example I can refer to that one time where the government issue the new one thousand pesos ARS denomination bill. Everyone started to use it even when, according to some not-properly-updated regulation, each payment in cash of one thousand pesos or more was forbidden by law and the payment was legally null. 

Regarding the swap between ARS/USD the Government decided to fully allow the black market because his objective on the topic is fulfilled even if every Argentinian uses it to exchange their currencies. The real reason behind the regulation is for the Government to obtain USD at a cheaper price than its servants. Every time a physical item produced in Argentina is exported legally, the seller does not receive the amount of USD he agreed with the buyer, instead he receives the amount of ARS equivalent to those USD. But equivalent according to which price? To the official exchange rate set by the Central Bank of Argentina, of course. This is because legally there are no other markets. The black market is one hundred percent ignore legally.  This produces a series of consequences that affect human actions and produce miscalculations of the individuals in several ways which I won´t address in this article. However one key consequence that I want to explain is how the Government maximizes its profit to the detriment of the exporters of physical goods. 

This happens because the Government sets arbitrarily any official exchange rate he wishes and sets it in a lower number than the price being paid in the free market. 

I´ll use a brief description that may help the reader to understand this -government induced- monetary madness. 

Alice is a soy producer in Argentina. She sells 1 ton of soy in the Chicago market at $532 USD per ton. The government grabs the $532 USD paid by the buyer, and keeps them to itself. Then it pays Alice the amount of 532 multiplied by the current official exchange rate of 106 ARS per USD. So Alice collects the amount of 56.392 ARS (minus lot of taxes). Alice doesn’t have the option to collect the USD so, in the lack of a better option, she grabs the ARS. Now let´s imagine that Alice wants to invest those ARS, basically because they have a depreciation rate around 60% yearly. Let´s imagine that, like most Argentinians do, she decides to buy USD to prevent herself from inflation (ironic right? but that´s none of our business).
Let´s remember now that is not legal for her to buy USD so she can´t go to the same bank and make a purchase for a similar exchange rate that the one she received for her soy. Her only option is to go to a “cueva” or do any other kind of p2p trade. So, she goes to her dealer and gives him the 56.392 ARS. The dealer will take the ARS at the black market exchange rate which currently is 211 ARS per USD. 

So, Alice started with a sale actually valued and paid by the buyer of $532 USD but she only managed to get ahold of $267 USD (minus lot of taxes).

Now lets do Bob, he´s Alice´s friend of course. He´s a content creator that sells his services to an offshore company located in Uruguay. He recently did a work which he billed $532 (same amount Alice was paid for her ton of soy). He collects his payments directly in bitcoin or through an offshore bank account with a ramp to an exchange, dex or any type of digital p2p (preferably done by like local bank transfer). 

He collects his $532 and saves them in whatever money the platform allows him. He should know better and save it in bitcoin while holding his private keys, but that´s none of our business. When Bob needs ARS in order to pay rent, food, etc he sells his USD or sats at a black market exchange rate. Currently 204 ARS per USD, that´s almost twice the official exchange rate. 

In summary: each person in the example produced $532 USD worth of goods or services, Alice only managed to hold $267 while Bob can keep the whole $532 because he escaped the official exchange rate while Alice couldn’t do it. 

One of the perks is that this system creates an unbeatable context for digital nomads and all kinds of companies earning and paying taxes offshore while living or being developed physically in Argentina.

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ps: did you know that there´s a Bitcoiner Citadel being developed in Argentina? More info: Alephcitadel.com