Planet Money - A black market, a currency crisis, and a tango competition in Argentina

Episode Date: September 23, 2023

The Nobel-prize winning economist Simon Kuznets once analyzed the world's economies this way — he said there are four kinds of countries: developed, underdeveloped, Japan... and Argentina.If you want to understand what happens when inflation really goes off the rails, go to Argentina. Annual inflation there, over the past year, was 124 percent. Argentina's currency, the peso, is collapsing, its poverty rate is above 40 percent, and the country may be on the verge of electing a far right Libertarian president who promises to replace the peso with the dollar. Even in a country that is already deeply familiar with economic chaos, this is dramatic.In this episode, we travel to Argentina to try to understand: what is it like to live in an economy that's on the edge? With the help of our tango dancer guide, we meet all kinds of people who are living through record inflation and political upheaval. Because even as Argentina's economy tanks, its annual Mundial de Tango – the biggest tango competition in the world – that show is still on.This episode was hosted by Amanda Aronczyk and Erika Beras. It was produced by Sam Yellowhorse Kesler with help from James Sneed. It was engineered by Maggie Luthar, fact-checked by Sierra Juarez, and edited by Molly Messick. Alex Goldmark is Planet Money's executive producer.Help support Planet Money and get bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. The Nobel Prize-winning economist Simon Kuznets once analyzed the world's economies this way. He said there are four kinds of countries, developed, underdeveloped, Japan, and Argentina. Ugh, Argentina. If you want to understand what happens when inflation really goes off the rails, go to Argentina. Annual inflation there over the past year was 124 percent. Even in a country that's already deeply familiar with economic chaos, this is dramatic. So a couple of weeks ago, we went to Argentina to see what this all looks like. went to Argentina to see what this all looks like.

And we arrived along with thousands of other foreigners because even as the country's economy was tanking, it's Mundial de Tango, the biggest tango competition in the world with a very charming MC, Mr. Carlos Lin. That show was still on. When we walk into the competition, there are nine couples on stage, all dressed very formally. Men in dark suits, the women in gold lame, dark red velvet, black satin. The couples dance in a slow, counterclockwise circle.

We are, after all, south of the equator. The moves are dramatic, improvised, yet synchronized. The couples keep their faces close as though at any moment they're going to make out. But they don't. Thankfully, they don't. There are dancers here from Ukraine, Indonesia, Algeria, Italy, more than 35 different countries. And arguably, if you want to really see all of the strange things that are happening in Argentina, as inflation spikes and the Argentinian peso tanks, they are easiest to see through the eyes of an outsider.

That's because this country's history of economic turmoil goes back a long time. So for anyone who lives here, they're kind of used to it. So we are here to meet one dancer in particular. Her name is Saya Date. Saya works in tech in India, and late last year she sold a company she founded. She decided she could afford to spend a few months on this thing that she loves, tango. So now she's part of the first couple

to ever represent India at this competition. When we meet her, she's just finished dancing. She's still giddy with stage energy. We have two rounds in the qualifying, so today, tomorrow, and then at the end of that they post the results. So until then, ignorance is bliss. It's finished. Saya's been in Buenos Aires since the end of June. And in those few months alone,

she has seen Argentina's economic crisis get much worse. And she's the one who said to us, Tango can help explain the economy here. Hello and welcome to Planet Money. I'm Amanda Aronchick and I'm Erika Barris. Right now, the country's currency, the peso, it's collapsing. Argentina's poverty rate is above 40 percent. And people here might be on the verge of electing a far-right libertarian who is promising to replace the peso with the dollar. Today on the show, we are on a mission with our tango dancer, Saya. We're going to follow her through the streets of Buenos Aires,

meet everyone she meets, and try to understand what is it like to live in an economy that's on the edge. Okay, I'm Carlos Lin in the Tango World. Hello and welcome to the Money Planet. Amazing! Soy Carlos Lin en el Mundial de Tango. Hola y bienvenido al Planeta Dinero. Right now, we are outside the building where the tango competition is happening. Okay, Saya went to go get coffee. She's not here. Our Uber is here. This is going to get awkward in a second. The minute Saya gets back, we're going to follow her on her tango tours to see what we learn. But her coffee is taking too long, and the Uber drives off. Oh my God, there goes my Uber rating.

So, while we're killing time on this street corner, a little bit of history. Back in 1991, Argentina's government pegged the price of the peso to the U.S. dollar. They said one peso shall equal one dollar. This was a pretty unusual move. Other countries do peg their currencies to the dollar sometimes, but they don't usually claim that they have equal value. And it was wishful thinking because the peso proved to be worth much less. Some years go by, the economy gets worse. And in 2001, there's a run on the banks. Now, the banks were functioning mainly with dollars and they start to run out. And so the government did something pretty extreme. It told the banks, any accounts with U.S. dollars in them,

convert those accounts into pesos. And poof, practically overnight, people's net worth plummeted and their savings were gone. So Argentinians do not trust their banks. And they do not trust their peso. And Zaya's back with her drink in her hand. I actually ended up getting hot chocolate because I needed I know, I caved last minute. And now we're off. First thing we're

going to do, let's go see a shoe seller. Tango shoes, of course. We're going to Neo Tango. It's I guess one of the more popular ones among my Indian friends. And my teacher back home has sent me a list of designs that she wants and asked me to go and buy it for her.

Like everyone else in this country, Saya has been watching the dramatic drop in value of the peso over the last few weeks. People here watch the exchange rate between the dollar and the peso as you might watch the weather forecast, checking a few times a day, treating it as a barometer of the overall economic health of the country. When Saya first arrived in June, one U.S. dollar was worth about 490 pesos. Two months later, one U.S. dollar is worth more than 700 pesos. Saya planned her shoe shopping knowing her dollars were only going to go up in value.

For me, I bought like two pairs so that I can practice and compete right off the bat. Saya planned her shoe shopping knowing her dollars were only going to go up in value. For me, I bought like two pairs so that I can practice and compete right off the bat, like as soon as I got here. But I saved my shopping for the very end. We're going to go visit the shoe seller because we want to know how a small business deals with a currency in free fall. But we start to see things immediately, even before we get to Neotango. Because the minute you do anything or meet anyone in Argentina, you wind up learning about the economy. Like on our car ride.

We get in, start chatting with the driver. His name is Juan Pablo Gospina Gomez. And I ask him the question we plan to ask pretty much everyone we meet here. When the peso starts to get devalued and is worth less and less, how does that work for you? Like, what do you have to do differently? I have to find another job. It will be complicated for Juan Pablo to find another job because he's already got three. He's week and Uber driving, selling Natura products, which are kind of like Avon, but from Brazil. And then there is his main job.

I work with, you probably know these brands that I'm going to tell you. Oreo. Oreo. A cookie? Milka. Oh yeah, I know Milka. I love Milka bars. I work with them. Okay. What do you do for them? I work with customer service. So if I have a complaint about my Oreo, I call you? For sure. Or if I'm happy about my mobile bar, I can also call you.

Who has complaints about Oreos? Never mind. Oreo is always good. Oreos. We all briefly celebrate the Oreo. I mean, come on, what a cookie. Also, turns out, not a bad job. Thankfully, I am working not a bad job. Saya's listening to all this, and she gets stuck on what inflation means if you have a regular job and paycheck. She jumps in with a question. Does Oreo also adjust your salary based on inflation? Yes, because inflation is like 10 percent. He's talking about monthly inflation. In August, it was over 12 percent. They increase our salaries at least three times per year.

This is wild to me. Inflation is so ordinary here, many employers promise regular raises. Otherwise, their workers' standard of living would just drop and drop and drop. Getting a raise two or three times a year, it's pretty normal. Not just if you work for a big company. It works this way for a lot of government employees too. Which is unsustainable. The government is essentially printing money to fund those raises. And printing money, yeah, that causes more inflation.

We pull up to the address. Does it look open? Yes. It's open. Yay! Amazing! We say goodbye to Juan Pablo, and Saya, Eric, and I walk up to a very she-she boutique. Shoes.

Looks fancy. We get buzzed in and there are shelves and shelves of strappy high heels. Not only are they three inches high, Saya reveals a tango secret. For tango shoes, I have to buy shoes two sizes smaller than what I actually wear. Why?

Because it's supposed to be tighter than regular shoes because it's supposed to be like an extension of your foot. So it was actually really painful in the beginning and then they kind of open up a little bit. Yeah, wearing shoes that are too small for your feet, it's going to be painful. Good Lord. I still can't get over that.

Saya finds what she's looking for and goes up to pay. How much is it going to cost? In dollars, 69. $69? Okay, and what would it be in pesos? 49,000 pesos. Okay. 49,000 pesos.

In a country where the largest denomination is 2,000 pesos, people sometimes end up walking around with very, very large stacks of bills just to buy regular things, like a pair of shoes. And businesses sometimes have stashes of different currencies on hand, like Juan Pablo Viganotti, the guy selling us the shoes. Would he accept dollars and pesos? Yes. Sí.

OK, los dos. Y euros. OK. And euros. He has dollars and euros in addition to pesos because the store caters to both a local crowd and an international one. But this business still has a lot to contend with because of the peso. The shoes they sell are assembled in Argentina, but some of the materials they're made with are imported. So if those imported materials stay the same price as the peso falls in value, they become more expensive.

And that means Neotango has to raise their shoe prices. How often is the price changing? Lately, at least once a month. He says lately, at least once a month. And in two weeks, three times. You had to change the price three times in the last two weeks. Yes. And you were changing it to go up or to go down?

¿Cambiándolo para que los precios vayan arriba o para abajo? Siempre para arriba. Ah. Siempre. Nunca para abajo. Prices here, he says, always go up, never down. Now, inflation has been a problem in Argentina for a long time, so his store is used to raising prices.

But in August, the peso really took a hit. It happened after this far-right presidential candidate, Javier Millet, unexpectedly came out ahead in a primary election. People freaked out. There was a run on dollars. The peso got devalued and inflation spiked. When that happened, some store owners just stopped selling their stuff. It was too chaotic.

They had no idea what price to charge. And that is what led Neo Tango to raise their prices three times in the last two weeks. Talking about how much the peso has fallen recently, Juan Pablo says that sometimes it's scary to have one value come out and then it changes the next week and then the next week. He goes on to say it's surprising, but... He makes a big gesture like, what are you going to do, man? This, we've come to learn, is a very Argentinian response. People are sort of like, it's Argentina. We're used to it. But occasionally someone would reveal that, yes, they were in fact really scared,

that it's not clear what's going to happen next. There could be hyperinflation. There could be protests in the streets. Coming up after the break, the black market for dollars and pesos. Museums for science, for history, for art, they're everywhere. So why not for economics? I think it's partly that the economy is actually kind of abstract and kind of complicated. But economist Tim Harford is up for the challenge. He knows exactly what he'd put in his fantasy museum of the economy,

objects that would tell the story of the modern economy. And it's not a bar of gold. You've got something that is roughly the size of a shoebox, and it looks as though it's been covered in yellow butter icing by an incredibly drunk chef. That's in our latest bonus episode for Planet Money Plus listeners. If that's you, thanks for your support. If it's not, it could be. Sign up at plus.npr.org. Argentina's currency shenanigans didn't stop 20 years ago

when the dollars in everyone's bank accounts were abruptly turned into pesos. On and off for years, the country has been manipulating its exchange rate. Instead of letting the rate float around on the whims and winds of market forces like most major economies do, the government now controls it. like most major economies do, the government now controls it. And they've set an official rate that claims the peso is worth far more than it really is. And you can tell just how far off that official rate is by coming here, to one of the country's many black markets. Cambio means change, or in this context, exchange.

And this is how these black markets work. People stand on the street calling out cambio, cambio, cambio to pull in tourists who want to exchange dollars for pesos at a far different rate than the one the government sets. I know this music is giving real Star Wars cantina vibes. Someone was randomly playing a didgeridoo. But we're actually on Florida Street, which is your basic shopping street for tourists. Saya needs more pesos because that's how you buy most day-to-day things. So we find a woman calling out cambio and she and Saya start negotiating a price.

and she and Saya start negotiating a price. They settle on 705 pesos for one U.S. dollar. Yes? Yeah, 705. 705. Yes. The government's official rate would have been about 350. Lots of people use these exchanges, but exchanging dollars for a rate that's different than the government's official rate is actually illegal.

So you don't exchange money right on the street. Instead, the cambio person takes you into what's called a cueva, which is Spanish for cave. We're walking inside like a little mini mall. We follow the woman into a small, kind of shady-looking store. The man doing the actual exchange is sitting behind a window. There's a sign for bus tickets, some T-shirts for sale. Like, if they needed to, they could very quickly shapeshift into a tourist shop. Saya tells them how much she wants to exchange.

$300 and $100. $300 and then $100. If you think about the government's official exchange rate as sort of like a dam intended to shore up the peso, these exchanges are like cracks where market forces seep through. And these black market exchanges are such an established part of the way Argentina works

that they've got their own rules. They have standards. Like when Saya tries to exchange an old $100 bill. ¿Por qué? ¿Este no? Este es el nuevo. Uh-huh. Ah. Can you take one of these?

No. No? Este es billete acá. Okay. Cara chica. Yeah, that's the cara chica. Se paga $550. Cara chica. Yeah, that's the cara chica. Se paga 550. Cara chica means small face.

It's what they call the old $100 bills with a small-faced Ben Franklin on them. They say they'll take Zaya's old bill, but at a worse rate, 550 pesos per dollar. Why is it less? Y es como dice él, es más fácil de falsificar que el nuevo. Uh-huh. Okay, so it's much easier to counterfeit than the new ones. In a place where the local currency is so unstable and unloved, counterfeiting Benjamins is its own industry.

So the woman says they're taking a risk by accepting Saya's old small-faced $100 bill. Because it could be a fake. They'd rather have her crisp new hundreds with a blue stripe down the middle. We get ready to leave the cave. And on the one hand, the transaction Isai has done is illegal. But on the other hand, it's kind of what everyone's doing. It's accepted. Which becomes clear when we head back out.

The woman from the exchange points out a police officer sitting right outside the cave. It's their security, she tells us. A police officer moonlighting as their guard, still wearing his police uniform. The exchange woman goes back to her post on Florida Street. That transaction Saya just did shows us the pesos' true market value, Street. That transaction Zaya just did shows us the pesos' true market value, basically half as much as the government's official rate. Now, as tourists walking out of an exchange, Buenos Aires is wildly cheap. But if you live in Argentina and you want to exchange your pesos for dollars, the rate you get at the caves is terrible. You'd much rather buy dollars at the official rate. But the government puts up a bunch of barriers to that.

Because if they gave people unlimited access to that rate, the government would be running out of dollars in no time. So they keep adding more and more rules to keep people from buying dollars at the official rate. It's the next day, and we are back at the tango competition. When we find Saez, she's in an amazing dress. Teal and black and silver, sequins everywhere. Oh my goodness. I don't even know, I don't know if I would recognize you. I don't think I recognize myself.

This is probably what you see on tango posters, the hairstyle, the makeup. It's like very extra. Today, Sia is doing a choreographed dance for the competition. It's more showy with a lift and lots of spins. Keep in mind those high heels. Well, very good luck. Thank you. We'll be watching. Zaya heads backstage,

and we start talking with someone she's met since arriving in Buenos Aires. His name is Martin Ochoa. He's here at the Mundial de Tango because he loves tango. And he's making some money by shooting and editing videos of the performers, 50 U.S. dollars for three minutes.

He starts by telling us he grew up outside the city. Tucumán. Tucumán. It's in the north of Argentina. Okay. He fell in love with tango when he was in Patagonia. I first encountered tango at the end of the world, he says. Martín says he relates to tango for reasons that go beyond the fabulous

costumes and the dramatic moves. He says tango doesn't only talk about romance. It also talks about how hard life is and how disappointing it can be. He says it's about people bending rules and going against their morals to survive in a state of economic crisis. Martín says if you listen to the lyrics of some of the most iconic tango songs, they're about the depression, about unemployment, about a lack of economic power. And he says all of the daily improvising that people have to do in Argentina reminds him of tango, like when people try to make money on the side or do things that are lightly illegal. The way he sees it, Argentina has two parallel economies. This idea of parallel systems makes so much sense to me.

For years, the Argentinian government's been saying the peso is worth more than it is. At the very heart of this country's economy, there is a lie. And so people find ways around it. Like a lot of people, Martin says he is worried about the upcoming presidential election. The country may bring to power that libertarian outsider who said he wants Argentina to dollarize. Send the peso reeling once and for all. Is that the stage? That's the stage. The final round of the Mundial de Tango takes place at night. The city closes down one of its major streets and sets up thousands of chairs.

You can see the lights from blocks away. It's lit up pink and it has Tango written on it. Saya and I want to get closer. Yes, at least I can say I was at the finals of the Tango World Championship. Although, just to see it. Saya got eliminated a few days ago. She is not competing tonight. But we work our way past a bunch of barriers so that we can see the dancers up close. Very close to the stage. I haven't actually seen the dancers.

There they are. Oh my goodness. This is beautiful. The performances are beautiful. In the end, Argentinian couples win the two big prizes. This year, those are each worth 100,000 pesos. If the economy continues to falter, though, the prizes will be worth less and less. this episode was produced by sam yellow horse kessler with help from james need it was engineered by maggie luthar fact-checked by Sierra Juarez,

and edited by Molly Messick. Alex Goldmark is our executive producer. Special thanks to Lucas Babic, Shashank Dugal, Edward Gilliland, Carrie Kahn,

Dr. Miguel Kigel, Professor Mariana Lucci, Alejandra Marquez-Hanzay, Professor Andy Neumeier, Nicolas Saldias, and Ezekiel Zadenberg. I'm Amanda Aronchik. And I'm Ericarika Barris.

This is NPR. Thanks for listening. And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.