Mattresses, that amazing invention from Neolithic times improved upon by the Arabs before the time of the crusades, have a special symbolism in Argentina. More than just a place for resting and copulation, they are also commonly used to keep money safe. And when I say “money”, I mean dollars, as since the 1970s nobody trusts the peso, the national currency.
Over the past half-century, mattresses have been one of several hiding places used by Argentines to keep their savings out of the grip of governments and the frequent bankruptcies of local banking entities – Argentina has a long list of banks that have failed, leaving account holders in the lurch. Argentinians also hide dollars in safe deposit boxes, in tin cans, inside books, under the floorboards, and in financial institutions abroad. This is the case of the branches of Uruguayan banks in the city of Colonia del Sacramento, which have a majority of customers from the Argentine middle class.
So mattresses have long been a metaphor for Argentina‘s economic instability. The “mattresses” are used by all social classes. Every Argentinean keeps dollars, from the housemaid who manages to save $200 to the businessman with millions in safes in his residence (or in accounts outside the country).
In 1953, from the top of the balcony of the Casa Rosada, the presidential palace, in front of a huge crowd gathered in the Plaza de Mayo, President and General Juan Domingo Perón asked, in a provocative tone, “Has anyone there ever seen a dollar?” The crowd, like a cheerleader, answered in unison, “No!”. Perón smiled. The populist and nationalist leader was trying to minimize the growing importance of the U.S. currency in his country. But already at that time, even the Peronist militants, on the sly, started saving in dollars.
The habit of keeping money outside the country or in “mattresses” became an Argentine classic after the great crisis of 1975. And it intensified with the crisis of 2001-2002. At that time, Argentinians had a total of $81.87 billion outside the system. Two decades later, the volume is considerably larger, since according to the Balance of Payments report prepared by Argentina’s National Institute of Statistics and Censuses, this metaphorical cushion currently holds $233.32 billion (and grew by $900 million in the last quarter alone).
This is equivalent to sixfold the Central Bank’s gross reserves of $42 billion. Or, fivefold more than the debt Argentina has with the IMF. This volume of dollars “in the mattresses” is equivalent to 55% of the country’s GDP.
Today, October 22nd, the price of the “blue dollar” (the popular denomination for the dollar in the parallel market) reached the highest price of the year, 195 pesos. The price is impressive not only because of the rise in recent years (two years ago, when president Alberto Fernández was elected, it was 67.75 pesos, and half a decade ago it was 15.22 pesos) but also because of the huge gap between this informal price and the official dollar, of “only” 104 pesos. That is, between the two exchange rates, there is a disparity of 87%.
Argentina is a kind of “Dona Flor and her two husbands”. Or even better, to paraphrase Jorge Amado’s famous novel, “Dona Argentina and her Two Dollars”. The official dollar is like Teodoro, the quiet and boring pharmacist who married Dona Flor when she was widowed. The parallel dollar, on the other hand, is that coveted dollar that is always rising. A kind of Vadinho, the priapic spirit of Dona Flor’s deceased spouse.In other words: officially it does not exist, but it is there (and it is what the population wants most).
And, the more the dollar soars, the more Argentines want dollars. According to U.S. officials, Argentines are the second most dollarized people in the world, behind – obviously – the United States. The Russians are ranked third.
This “dollarized” mentality has not changed for half a century, whether the government in office was neoliberal, Keynesian, populist, developmental, or nationalist.
READ ALSO: Venezuela’s cosmetic subtraction of zeros from the national currency
There are a few reasons behind the hiking dollar…
- Inflation, which reached 3.5% in September, and 52% in the last 12 months.
- The growing uncertainty about the chances of reaching an agreement with the IMF to roll over Argentina’s debt.
- The political uncertainties are due to the proximity of the parliamentary elections on November 14. There are odds of a defeat as in the primaries in September. If this happens, the government will cease to be the main political force in Congress.
- The concern about what kind of economic policy President Alberto Fernández’s government would adopt in case of victory or defeat in the parliamentary elections. One of the worries is that the government will implement a major devaluation.
- The evidence that Fernández is losing influence to his vice president, Cristina Kirchner. The government’s approval rating, which a month ago was bad at 32%, is now worse, at only 27%, according to a survey by the Poliarquia consultancy. Fernández’s authority is disintegrating, especially after the intense criticism leveled by the vice-president herself. In addition, the cabinet has been reformed and now has more “cristinistas” and fewer “albertistas”. Only 8% consider Fernández to be in charge.
- Tension with the businessmen. Days ago, the government ordered a price freeze on 1,400 products until January 7, in an attempt to contain inflation. The government’s list includes products such as pasta, eggs, and milk. Strangely enough, prices have also been freezed on products such as champagne, vodka, wine, and wrinkle creams. Price freezes have been adopted by governments of various ideological spectrums since the 1970s, such as the military dictatorship and Raúl Alfonsín’s government. More recently, Cristina Kirchner’s government, between 2007 and 2015, and also Mauricio Macri’s, resorted to freezing prices. All of them failed and did not tackle the inflation causes.
Behind the half-century tradition of keeping dollars in the mattress are…
- Major crises
The constant economic crises since 1975, the year in which the then Minister Celestino Rodrigo implemented the first major prices adjustment in the country’s history, which caused economic chaos. From then on, Argentines have suffered a total of seven major crises (1975, 1982, 1989, 1995, 2001-2002, 2009, and 2018 to the present).
In this period, Argentines suffered sudden devaluations, three general bank confiscations, recessions, long periods of inflation and hyperinflation, arbitrary nationalizations and disorganized privatizations
Since “El Rodrigazo”, the running of the country has had a lot of instability: Argentines have been governed by 19 presidents (of which 4 were provisional, one civilian overthrown by the military, 2 military officers overthrown in coups by other military officers, and two elected civilians who resigned), 38 Economy ministers, and 32 Central Bank presidents. All this in only 46 years.
READ ALSO: Bolivia’s deep-sea navy bombs Ulan-Bator – but not
- Poverty
In 1974 Argentina had a poverty rate of only 5%, similar to that of European countries. A year later came the first big economic crisis and poverty began to grow. The military dictatorship (1976-83) produced more poor people, reaching 21.6%. With the return of democracy, poverty fell to 14.2% under Raúl Alfonsín. But with hyperinflation, the number of poor people grew again over the years. In 2015, Cristina Kirchner ordered the intervention of Indec, which began to make up the figures. According to the government, the proportion of poor people was lower than in the richest countries, including Germany, with 5%. But a forecast by the Catholic University indicated that the real poverty was 30%.
The Indec’s intervention ended during Macri’s government. Weeks ago, the agency announced that 40.6% of Argentines are poor. And 10.7% of Argentines are indigent.
(Translated by Carolina Pompeo)
