Planet Money – A black market, a currency crisis, and a tango competition in Argentina

Intro

In this episode of Planet Money, the team explores the economic crisis in Argentina and its impact on everyday life. They delve into the country’s high inflation rate, the collapsing currency, and the unique role of tango in understanding the economy. Join them as they uncover the challenges faced by businesses, the distrust in the banking system, and the potential for political change.

Main Takeaways

The Economic Crisis in Argentina

• Argentina’s annual inflation rate over the past year was 124%, which is dramatic even for a country familiar with economic chaos.
• Argentina’s currency, the basil, is collapsing, and the poverty rate is above 40%.
• People in Argentina might elect a far-right libertarian who is promising to replace the basil with the dollar.
• Inflation is so ordinary in Argentina that many employers promise regular raises to adjust for it.
• Inflation is a normal part of life in Argentina, causing regular raises for employees and leading to unsustainable government spending.

The Tango Connection

• The Mundial Detango, the biggest tango competition in the world, was still ongoing despite the economic crisis in Argentina.
• Saya Dhape, a tech worker from India, is part of the first couple to represent India at the tango competition. She says tango can help explain the economy in Argentina.

The History of Currency Instability

• In 1991, Argentina pegged its currency to the US dollar claiming they have equal value, but the peso proved to be worth much less.
• In 2001, there was a run on the banks and the government converted all accounts with US dollars into pesos, causing people’s net worth to plummet.
• Argentinians do not trust their banks or their peso due to economic instability.

The Black Market and Exchange Rate Manipulation

• Black markets exist in Argentina where people exchange dollars for pesos at a far different rate than the government’s official rate.
• Exchanging dollars for a rate that’s different than the government’s official rate is illegal, but it is an established part of the way Argentina works.
• The true market value of the peso is basically half as much as the government’s official rate.
• The government’s official rate for the peso is higher than its true market value.
• People find ways to work around the government’s lie about the peso’s worth.

The Impact on Businesses

• Buying everyday items like shoes can require carrying large stacks of bills due to the low value of the largest denomination.
• Businesses like Neotangu must contend with rising prices due to the falling value of the peso and imported materials.
• The recent devaluation of the peso due to a political event led to chaos and multiple price increases for Neotangu.

The Potential for Change

• The upcoming presidential election may bring a libertarian outsider who wants to dollarize Argentina.
• The value of prizes, such as those for the Mundial de Thangol, will decrease if the economy continues to falter.

Summary

The Economic Crisis and Tango’s Role

Argentina is facing an economic crisis with an annual inflation rate of 124% and a collapsing currency, the basil. Despite these challenges, the Mundial Detango, the world’s biggest tango competition, continues to take place. Saya Dhape, a tech worker from India participating in the competition, believes that tango can provide insights into the country’s economy.

A History of Currency Instability

Argentina’s currency instability dates back to 1991 when the peso was pegged to the US dollar. However, the peso proved to be worth much less, leading to a loss of trust in banks and the currency. In 2001, a run on the banks further worsened the situation as accounts with US dollars were converted into pesos, causing a significant decline in people’s net worth.

The Black Market and Exchange Rate Manipulation

Black markets thrive in Argentina, where people exchange dollars for pesos at rates different from the government’s official rate. This practice is illegal but deeply ingrained in the country’s economic system. The true market value of the peso is significantly lower than the government’s official rate, leading to a lack of trust in the currency and creative ways to circumvent the government’s deception.

The Impact on Businesses and Potential for Change

The economic crisis has a tangible impact on businesses, with rising prices and the need to carry large stacks of bills due to the low value of the largest denomination. Neotangu, a tango business, faced multiple price increases and chaos due to the recent devaluation of the peso. As the upcoming presidential election approaches, there is the potential for change, with a libertarian outsider advocating for dollarization of Argentina.

Conclusion

The economic crisis in Argentina has led to high inflation, a collapsing currency, and widespread distrust in the banking system. Despite these challenges, tango continues to be a symbol of resilience and a lens through which the economy can be understood. As the country navigates its political future, the potential for change and the impact on businesses and everyday life remain uncertain.