The multiple exchange rate system - which the government does not acknowledge - forces wealthier Argentines to pay more to buy dollars on the black market. Exporters who would benefit most from a weaker peso must sell all their proceeds at the official rate, which some say overvalues the local currency by at least 15 percent.
An Argentine broker who sells food products abroad said he used to travel overseas 10 times a year on business but he has cut that back to two trips because buying dollars is so pricey. "You make your sales on the road, not by email," the broker said on condition of anonymity for fear of government reprisals.
"It's very difficult for small companies to travel abroad, first because they don't know if they'll be able to sell their products because they're no longer competitive, and secondly because they have to buy dollars at 7 (pesos per dollar)." The broker said some exporters have stayed afloat by teaming up with importers, who must match their purchases with sales abroad under the leftist government's offbeat rules. The importers pay exporters to sell on their behalf and end up compensating for the exchange rate's loss of competitiveness.
The official exchange rate in Latin America's No 3 economy is 4.66 pesos per dollar. But a virtual ban on foreign currency purchases has pushed the black-market rate to about 6.30 per dollar, marking a 35 percent premium. Some companies pay about 6.50 pesos per dollar to buy stocks and bonds that can be sold abroad for greenbacks. And a new 15 percent tax on credit card use abroad effectively creates another exchange rate of 5.37 per dollar.
The measures are similar to those in socialist Venezuela. Economists say they will hit investment and growth by sowing uncertainty over the direction of exchange rate policy. They could worsen annual inflation now near 25 percent as merchants price their goods in line with the rising black-market dollar rate. The controls encourage Argentines to take illegal shortcuts to get dollars, ranging from fictitious credit card purchases to exchange deals in school yards and local shops.
Exporters say the real solution is a weaker official rate. "I think the dollar should be at 6.50. That's the competitive rate we need," the food broker said. "Exporters' margins are so low, we all think (the official rate) will be modified in the coming months. This can't last." The Argentine obsession with saving in dollars is understandable given the collapse of a decade-long currency peg in 2002, which led to a freeze and devaluation of bank deposits.
Since 2003, the central bank has intervened on the foreign exchange market to avoid volatility and bought dollars to bulk up its reserves. It has allowed the peso to depreciate gradually in nominal terms but high inflation has meant local costs as measured in dollars are no longer cheap. Fernandez's late husband and presidential predecessor, Nestor Kirchner, emphasised the need for a competitive exchange rate to encourage exports. Fernandez is more interested in stoking the domestic market as the economy slows sharply after a nearly nine year boom. Exports are expected to fall to 17 percent of gross domestic product this year from 22 percent in 2005, private data shows.