Kyle Berg

People back in the U.S. frequently ask me about the prices of goods and services here in Argentina. One of the reasons I chose Argentina over Spain is that, for foreigners, it’s much cheaper. Before the economic crisis of 2001, the Argentine peso was pegged to the American dollar at a ratio of 1:1. Now it trades at a substantially reduced rate. The dollar exchanges at 3.1:1, the Euro 4:1, and if you’re from England everything’s practically free with your pound fetching 5.5:1. This has produced a tourism boom in Argentina. What once was one of the most expensive countries to visit is now one of the best bargains.

The fortune enjoyed by foreigners does not apply to the Argentine citizenry. Inflation has now “settled down” to a “mere” 10% annually. As a foreigner used to 1-2%, it’s almost impossible to comprehend how they keep going. The difficulty is that wages are lagging severely and come nowhere near keeping up with inflation. Every year their life becomes more and more expensive.

Economics 101 teaches the difference between prices and costs. Price is a ratio used as compensation in a transaction. A cost is what we give up to obtain something. Cost is the most accurate comparison as it shows one’s buying power. The price is the same for an Argentine or an American, but the number of hours put into earning that quantity of money is significantly greater for the Argentine. To give an accurate comparison of their buying power, I try to pretend that the price in pesos is really a price in dollars. For example, someone earning $20,000 a year in the U.S. would earn 20,000 pesos or less per year. Therefore, an Argentine buying a can of tuna in Argentina for 3 pesos ($1) is like an American paying $3 for that same can in the U.S. instead of the current price of roughly $1. While the American pays the same here, the Argentine pays 3 times more than his counterpart who earned dollars.

It’s not hard to see why very few people here can save money. Not only are common goods more expensive for them, imported good are almost unattainable. Name brands, whether in clothing, electronics, camping gear, or anything else are often 2 or 3 times more in dollars. Factor in the exchange rate and their buying potential and imported goods can cost them 6 to 9 times what we pay.

The table below shows some various items and their cost comparison. I assume each earns the same in their given currency, which may be a stretch given the low Argentine salaries. The Argentine price compares what Argentines pay in pesos versus what Americans pay in dollars while in Argentina. The US price compares what we pay in the US and what an Argentine visiting the US would pay in their currency of pesos. (Now you can understand why they can’t travel much). The final column compares relative costs of buying something on a peso salary in Argentina versus buying the same thing on a dollar salary in the US. For example 0.35 means they pay only 35% of what we pay while 2.8 means they pay 280% of what we pay. Please let me know if this doesn’t make sense. Sorry, I couldn’t get the table formatting right and had to make it a picture file. Click to enlarge.