Living in the shadow of financial ruin

Argentina has experienced on and off periods of severe hyperinflation since the 1970’s. Most of the inflation was eventually tamed when the minister of the economy resorted to pegging the pesos to the American dollar. This had the result of stabilizing the pesos and restoring some faith in the local currency.

However the relief was temporary and international currency upheaval had a devastating impact on Argentina between 1999 and 2002. Hyperinflation reared its ugly head again and Argentina was forced to default on most of its debt in 2002. This did not happen before the Argentinean government froze dollar-denominated accounts of ordinary citizens and force the conversion into devalued pesos at less than half their new value. This had a tragic impact on those who had been saving for years.

Unsurprisingly Argentinians remain distrustful of their currency. That is why the US dollars is still widely accepted throughout the country. Still today Argentina is ranked as one of the top countries most likely to default on their international debt. To prevent a bank run, the Argentinean government has instituted a limit per transaction: no more than 1000 pesos (250 USD) may be withdrawn at a time.

That is not all. We also found out that ATM machines regularly run out of money late in the afternoon! And don’t think that your shiny Visa or Mastercard is going to be a passport to a great vacation down here. Credit cards are rarely accepted and when they are, the state levies a huge 21% surcharge on all credit card transactions, a surcharge the store owner generally adds to the bill. It is definitely painful to live on the edge of financial ruin – for all parties involved.