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For decades, Argentines have been escaping the peso and seeking to shelter their savings in dollars or other currencies. The persistent inflation, which closed 2023 above 211% and accelerated in the first quarter of this year, then slowed down, deepened distrust in the local currency as an instrument to care for assets, beyond daily consumption or expenses. That explains why it grows year after year. The total volume of money that Argentines hoard outside the local financial system: at the end of the first quarter of the year, it reached US$277,003 million.
The numbers were released today by the Indecwhen publishing the quarterly report “Balance of payments, international investment position and external debt”, which corresponds to the first three months of the year. The estimated figure includes the funds stored in safe deposit boxes, bills kept “under the mattress”, both in dollars and other currencies, and the money that Argentines keep in bank accounts declared abroad.
“The accumulation of foreign assets that remain outside the system has a long history, so the current figure, although significant, is nothing more than a reflection of the continued weakness in the demand for pesos. This is in a context where Macroeconomic instability is the norm rather than the exception, a situation that is reflected in distrust in local assets in a context of systematically negative real rates given the escalation of prices,” he says. Milagros Suardi, economist at the consulting firm EcoGo.
“The phenomenon It deepened over the years, while the economy coexists with a restriction on the purchase of official dollars [cepo] and a high exchange rate gap. Ultimately, it is a problem of mistrust, in an economy that is not growing, that does not have credit in pesos and even less in dollars, and that is in turn a determinant for the impossibility of growth,” adds the analyst.
The figure is included in the segment “Other investments” of the international investment position section of the report of the official statistical entity, reflects a growth of 6.1% in relation to the number estimated by Indec a year ago. In absolute terms, They are US$15,879 million more than the US$261,124 million of the first quarter of last year. The increase implies growth in real terms, taking into account that inflation in the United States in the period was 3.5% year-on-year.
The growth is constant, and is verified when comparing with longer periods. For example, in the first quarter of 2021, the Indec estimate was $250,376 million. That is to say, In three years, the money that Argentines hoard outside the local financial system grew by US$26.627 billion.
For decades, the Argentine economy has been conditioned by the outflow of funds from the local financial system and the dollarization of savings by households, in a permanent dynamic that crosses governments and administrations. The succession of economic crises, capital stocks and controls, deposit confiscations, inflation, currency changes, fiscal deficit, issuance and loss of purchasing power Over the years, they formed a scenario of distrust both towards the local financial system and towards the peso, which for many with the capacity to save does not fulfill its function of safeguarding value and refuge for that capital.
On a day-to-day basis, the local currency, which loses purchasing power due to inflation, is used to make payments and everyday transactions (although more and more items, from properties or cars to issues of smaller amounts, such as instruments music, repairs or imported clothing, is priced and sold in dollars), and lost its role as a store of value. Consequently, thousands of Argentines who have savings capacity they resort to the dollar or other currencies to try to take care of their savings and protect themselves from inflation.
According to what was published today by Indec, Argentines had declared in the first quarter of 2024 some US$49,695 million in the concept of “Direct investment”, that includes goods, properties or other physical assets. This is US$3,235 million more than a year ago, which implies a growth of 7% year-on-year.
Meanwhile, the category “Portfolio investments”, that includes public securities, shares and other financial instruments, concentrates some US$94,062 milliona figure that reflects a year-on-year increase of 14.7%.
