Fair value: Milei attends a presentation at a federal complex in Buenos Aires. Each month hundreds of thousands of Argentines are booking shopping sprees abroad that are depleting the hard currency reserves Milei needs to defend the peso. — AFP
BUENOS AIRES: To understand the currency crisis rocking the Argentine economy and threatening to sink the government of President Javier Milei, just cross over the Andes mountains and descend into the Chilean capital of Santiago.
There, you’ll see scenes like the one Carolyn Perez witnessed the other day outside a Courtyard by Marriott hotel.
There were these two Argentine couples, recalled Perez, a security guard at the hotel, and they were loading all these bulky items they had just purchased into their car to drive back into Argentina.
First, they wedged in a TV, then another TV, then a full-sized refrigerator and then they squeezed their bodies into the car, one by one, and drove off as Perez looked on, dumbstruck.
“It was shocking,” she said. And, for the Milei government, deeply problematic.
For each month, there are hundreds of thousands of Argentines who, just like those two couples, are booking shopping sprees abroad that are depleting the hard currency reserves Milei needs to defend the peso as it comes under attack.
They’re travelling to Rio de Janeiro and to Miami and the Uruguayan beach town Punta del Este but, when it comes to pure shopping trips, mostly here to Santiago.
Along one popular border crossing in the mountains, the number of Argentine cars that have entered Chile this year is up 50% from a year ago and more than 150% from 2023.
More Argentines have travelled to Chile this year than have people from every other country combined.
Collectively, their purchases with Argentine bank cards have soared 438% in Chile this year, according to the consumer segment data tracked by payments processor Transbank.
In fashionable shopping malls, like Parque Arauco and Costanera Centre, the distinct sound of Argentine Spanish, with all its Italian inflections, rings out day and night, and in the parking lots, the blue-and-white “Republica Argentina” license plates are everywhere.
They’re there to load up on Jordan sneakers and Lenovo laptops and anything else they can squeeze into a suitcase.
The frenzy has been triggered by Milei’s own policies. Desperate to quickly tame runaway inflation, he has insisted on keeping the peso largely stable against the US dollar – a move that both holds down prices of imports and sends a broader signal of stability to a country ravaged by decades of economic chaos.
But in the process, the peso has become so strong, once inflation is factored in, that it’s making it incredibly cheap for middle and upper-class Argentines to binge on those imported goods.
And because Chile has such lower tariffs than Argentina – almost 30 percentage points less, for instance, on clothes – thousands of people are making the trek over the border every day to make those purchases.
It’s turned into such big business for stores in Santiago that some of them have exempt Argentines from a rule requiring customers enter a Chilean ID number when making on-line purchases.
These shopping trips “are clear evidence of the currency misalignment”, said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics.
Like many other analysts, Abadia estimated the peso is at least 20% – and perhaps as much as 30% – overvalued against the US dollar.
And it is this overvaluation, almost more than anything else, that is sparking a run on the currency that Milei himself has called a “panic”.
Maintaining investor confidence in an overvalued currency is always a challenge for policymakers, but especially at a time like now, when signs are mounting that Milei is losing the popular support he needs to extend deep fiscal cuts and implement his free-market reform agenda.
With key midterm congressional elections slated for late October, investors have been frantically yanking their money out of the country, fearful Milei will run out of dollars and have to abandon his defence of the peso.
Milei and his economic team argue the peso is fairly valued and vow, as they have for months, that they won’t let it plunge and reignite inflation.
So much hard currency is being spent in Chile, the tally now runs into the billions of dollars, that Argentine customs officials have begun to crack down.
They pop open car trunks and suitcases along the mountain-pass border stops and impose fines on those caught bringing back goods worth more than US$300.
The spending-limit rule has been on the books for decades but only now, travellers say, are officials enforcing it, albeit sporadically.
“Even with a fine, it’s often still cheaper than buying the same thing in Argentina,” said Lur Carreras.
Carreras, a travel agent who arranges bespoke shopping tours for young women, is part of a cottage industry that has quickly popped up to tap into the boom.
There are bus tours set up just for shoppers and social-media influencers hawking bargain-hunting tips and even personal shoppers – think Instacart but purchased over the border instead of across town.
One of those shoppers is Gabriel Damiani. He started a couple months ago after seeing his girlfriend make a lot of money as a personal shopper.
Damiani worries that he’s discovered the business too late. If the peso suddenly craters, like it has so many times before, the boom will come to an abrupt end.
This possibility was on Analia Raymundo’s mind, too, as she strolled out of an H&M store in Costanera Centre the other day with her mother and daughter.
“Some times it’s a good moment to buy,” Raymundo said, “and some times it isn’t.”
For now, the frenzy shows few signs of abating. Raymundo’s shopping cart was piled high that day with bags from H&M and other stores.
And a couple blocks over from the Marriott, Nathalie Diaz observed a scene at the Hotel Boulevard Suites that rivalled the one Carolyn Perez had witnessed.
Diaz, a hotel receptionist, described watching this family of Argentines pile box after box of items they had bought into their brand new Ford F-150 pickup truck.
Once filled to the brim, they pulled out and headed for the border.
Minutes later, they turned around and rushed back to the hotel, where the staff was waiting to hand over two full boxes of purchases they had left behind. — Bloomberg
