Purchasing Power of the U.S. Dollar in Latin America

Purchasing Power of the U.S. Dollar in Latin America

Part of our mission here at Hispanic Globe is to address issues of small or “micro” business for the “main street” folks in Hispanic countries who have to deal daily with the local economic realities and government monetary policy.

We won’t discuss politics here. This is not our focus, but there may be some indication that the current currency control measures by several South American countries may give rise to more difficult economic conditions for people in the street for the long term.

Purchasing Power of the U. S. Dollar in Latin American Street Scene in Buenos Aires

Street Scene in Buenos Aires, Argentina Wikipedia

For example, a few Argentines that I have spoken with recently (this is not an official survey) have indicated that dollar hoarding is on the rise in Argentina among the general population. There is an actual “black market” for U. S. dollars.  Other Latin countries are not immune to this either.

What does that mean to you?

Well for one thing, your dollars may be giving you a significant higher value above the official exchange rate in certain Latin countries.  If you’re paying cash for a transaction, you may have much more purchasing power than you imagine.

In an article by Marcelo Ballvé in World Politics Review (link below) entitled “Pay Now or Suffer Later: South America’s Currency Dilemma,” the author makes this point with Argentina, as well as other Hispanic countries.  Here is the link.

Purchasing Power of the U. S. Dollar in Latin American Street Scene in Buenos Aires

Street Market Buenos Aires, Argentina Wikipedia

The article indicates a continuing rise of “black market” dollars.  Argentine citizens are continuing to use the U.S. dollar as a savings device to defend against the devaluing of the Argentine Peso.

This is not a new phenomenon in this part of the world.  The hyperinflation of the 1980’s has not been forgotten by many in Latin America, and so the author points to the possibility of long term harm to the economies of several Latin counties with their governments trying to apply currency controls.

In the same article, the author also mentions Brazil having a problem with trying to cool down the volatility of the Brazilian Real.  To protect their exports, apparently the government is trying to keep the value of the Brazilian Real low compared to the dollar.

So they sort of have the opposite problem from Argentina.

Purchasing Power of the U.S. Dollar in Latin America Sao Paulo Stock Exchange Wikimedia Commons Rafael Matsunaga

Sao Paulo Stock Exchange
Wikimedia Commons Rafael Matsunaga

It seems that currency devaluation by governments is happening all over the planet, not just in Latin America.  Certain areas are developing quicker than others.

Actually, some economists may argue that today, the fiat currencies (currency based upon confidence alone) worldwide are in a race to the bottom.  Who really knows?

One thing for sure, your U.S. dollars will buy you more today in Argentina and other Latin countries than in the most recent past.  Wherever you live and work, when you visit the local grocery store or market to buy that next loaf of bread or carton of milk, inflation doesn’t lie at the checkout counter.

(If you would like to see a follow-up to this topic, you may sign up for our free newsletter “Hispanicus” at www.hispanicglobe.com.)

 

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