Friday, December 10, 2004
However, I think the real reason is that the Argentine Government has put pricing controls in place and neither the US Dollar nor US tourism is a concern. In other words, there really is no US influence in Argentina economically speaking, and prices have to be kept to where local citizens can afford to buy. So, going out to have some excellent steak and wine at a local café in Buenos Aires will cost you about US$25 for 4 people (you read correct, I did say four people). However, for locals who still mentally equate things when the Peso was 1 to 1 with the US Dollar, we are talking about AP$75 (or what is US$75 in local terms if you can understand the concept). In other words, the meal I just described cost AP$75 Pesos, but in US Dollar equivalent it is US$25. However, for citizens of Buenos Aires who obviously have not had any salary increases to keep pace with the devaluation, this is a seventy-five dollar meal, speaking in terms of previous exchange rates.I think this article is apropos in light of my posts about the USD. Couple of things I noticed. The government installed price controls as a political way to appease the masses. Devaluation involves inflation because imported goods are more expensive and the costs get passed on. I suspect price controls eventually will lead to shortages, black markets and corruption. Tourism is beneficiary of the devaluation. Is Argentina our future?