Argentina's peso-pegging lessons

Once ridiculously expensive, then ridiculously cheap, Argentina seems to have found a happy medium, writes JASPER WINN

‘CAFÉ! VINO! Y cigarrillos.” My Chilean cowboy friends in the far south of Patagonia were telling me what to carry across the border into Argentina. This was in 2001 on my first trip to the southern cone of the Americas. “It’s really expensive over there,” the Chilenos insisted. “Really, really expensive. Buy what you need here. Take food. Everything.”

In the 1980s Argentina’s hyper-inflation ran at an average of 300 per cent a year and peaked towards the end at around 3,000 per cent. Then, in 1991, the government put the brakes on by pegging the Argentine peso one-to-one to the US dollar. With a wave of the fiscal wand the country suddenly had a stable currency and every appearance of being rich.

Certainly, the middle-classes felt rich. Argentines flew to Miami on shopping trips, and onto Paris, London and Rome to revel in their European roots and into Chile just, it seemed, to strut around and annoy their neighbours by exclaiming how cheap everything was.

Crossing into Argentina for the first time my opening transaction was to buy a cup of coffee. I thought I’d displaced a decimal point in my currency exchange. But, no, a coffee really was 10 times more expensive than it had been a few hours and one border crossing before. True, it came in a fancier cup, and was bigger than the Chilean version, but my Irish-economy-pegged budget was going to take a hammering if this was the cost of life in Argentina. And it was. Everything was just too expensive. Rooms, meals, transport, drinks.

I loved Argentina, it was just that I couldn’t afford to love it. And nor in truth could the Argentines. For every middle-class, urban Argentine feeling wealthy there were two subsistence farmers or scratch-wage workers actually being poor. A strong peso was great for the imports stuffed into the shops but lousy for the exports needed to pay for them. And Argentine prices kept foreign tourists away.

Fast forward to 2002. I was retracing exactly the same route as 12 months before. But this time my Chileno cowboy friends had a new hobby. Shopping. In Argentina. "You won't believe how cheap it is over there," they whooped. "Spurs! Boots! Hats! Saddles! It's so cheap . . . es loco!"

They were right. The Argentine fiscal dream had ended and it was payback time. In just a few weeks the Argentine peso had been decoupled from the dollar. Like a clapped-out old car being towed up a steep hill by a powerful truck, when the rope between dollar and peso was cut the Argentine currency plunged back down the slope losing some 75 per cent of its value in the process. I arrived in Buenos Aires to find myself four times richer than I deserved to be.

God, it was tempting to just shout “Woo-Hoo”, book into the best hotel and hail a taxi to speed me between all those restaurants I couldn’t afford the year before. But to be honest that seemed a little insensitive in a city where accounts had been frozen to stop a run on the banks, where stunned men in Italian suits carrying pig-skin briefcases sat newly unemployed on park benches and where grannies thronged the markets selling family heirlooms (this was the time when foreign wheeler-dealers were picking up Tiffany lampshades, art-deco silver and antique Spanish jewellery for the cost of one small family’s meal). So, instead, I merely whispered woo-hoo. And then booked into a five-star hotel and headed to a famed asado restaurant for the best bife and tinto that newly-devalued money could buy.

But here’s the thing. This crashing of an artificially inflated economy had a genuine upside. With the peso pegged to the real world rather than to the US dollar, Argentine exports suddenly found a world market. That’s when Malbec started appearing on Irish wine shelves. Incoming tourism figures soared, too. And kept rising. In seven years both visitor numbers and per-capita spend doubled.

I’ve just spent five months working in Argentina, the first time I’ve visited in four years. The incoming tourists’ “Woo-Hoos” and the locals’ “Aaaaaghs” have faded. Prices have gone up. I found myself dropping a star on my hotel choices and searching out off-beat restaurants during 10 days in Buenos Aires. In other words, having a good value trip rather than the eye-wateringly expensive or crazy cheap experiences of the past. To be honest, it felt more comfortable paying a fair rate rather than scooping up bargains in a whole country’s fire-sale. Others seem to agree with me. Argentina’s tourism figures for 2010, so far, are already 10 per cent up on last year.

A financial disaster can be the loss-leader that reignites a country’s tourist industry, it seems. Quite a number of countries around Europe might be hoping that the Argentine example isn’t unique.