During the past 20 years, Argentineans have suffered through bank runs, recessions, austerity measures, salary and pension cuts, currency devaluations and a world-record sovereign debt default. The economy has rebounded somewhat, but high unemployment and sky-high inflation still linger. Experts believe the reported inflation rate — 10.5% in September — is closer to 25%.
The government provides a public pension plan, but it's not enough for most retirees, wrote Juan Pablo Fuentes, an economist at Moody's Analytics, to BBC Capital in an email. There’s a public health system that’s available for everyone, but because its service is generally poor, most people use a mixed system, partially funded by their payroll and employers. Upper middle class and wealthy Argentineans use private health care.
Budgeting for many purchases is difficult — high inflation causes prices to rise as the peso loses value. Savings accounts and time deposits, similar to term deposits, fixed rate bonds, certificates of deposit (CD) and fixed deposits in other parts of the world, are popular, though not terribly effective: The interest rate on 30-day time deposits, at 15.1% on 1 Nov, according to Argentina’s Central Bank, is below the inflation rate. Argentineans held about $150.3 bn pesos ($25.2bn) in savings accounts and about $355.1 bn pesos ($59.5bn) in time deposits.
Many upper and middle-class Argentineans save for retirement, health care and other needs in US dollars held in overseas accounts or kept at home.
“Our culture is to get assets denominated in [US] dollars,” said Augusto Posleman, managing director of private banking at Puente in Buenos Aires, Argentina.
Residents often buy US dollars through the country’s strong black market instead of official channels because of government controls that protect the country’s currency reserves. The exchange rate in early November was $1 to about $6 pesos; the black market rate was about $1 to about $10 pesos.
Durable goods, like cars and televisions, are not affected by inflation, making them common purchases for Argentineans. “A car in Argentina will keep its value more than a car in most other countries, especially developed economies,” said Fuentes.
Buying real estate is difficult because it is a challenge to save: formal mortgages are rare; all-cash transactions, with loans from family or friends, are conducted in US dollars.
Instead of purchasing equities in the country's small and illiquid exchanges, people buy US dollar-linked or US dollar denominated corporate and sovereign bonds. Investors purchase dollar-linked bonds with pesos and receive principal and interest payments in pesos adjusted for the exchange rate.