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Argentines find travel difficult as peso declines

- Associated Press - Monday, September 10, 2012

BUENOS AIRES — Argentines increasingly are feeling trapped inside their country as the government restricts access to the foreign cash they need to travel.

Legally trading pesos for dollars or euros has become ever more difficult as President Cristina Fernandez tries to keep dollars inside the country and bolster the Argentine peso's sliding value.

New rules that took effect last week are squeezing them still further by going after credit card spending.

Until recently, travel was a rare exception to the currency controls first imposed in November: People up to date on their taxes and poised to cross a border, tickets in hand, can buy $70 to $100 per person for each day they plan to spend outside the country.

But the process is bureaucratic and intrusive, and many say their requests are rejected for reasons they don't understand.

Credit and debit cards provided a legal way out, enabling people to make purchases and get money while abroad. Now the government is cracking down there as well.

The new measures make using plastic inside or outside the country less affordable by charging 15 percent in taxes on all foreign purchases that appear on credit or debit card bills, plus a 50 percent customs duty on any goods from abroad that might be brought back to Argentina.

Internet purchases on sites such as Amazon, eBay and the Apple Store are included, along with anything bought using online services such as PayPal.

Consumers will pay the tax along with their monthly card bills. And for the first time, the government will be able to scrutinize each cardholder's entire bill, tracking spending to capture anything unreported on customs and tax declarations.

Argentines are taxed on wealth as well as income, so this gives tax agents powerful new tools to collect a piece of everything they own.

Tax chief Ricardo Echegaray described twin objectives: catching scofflaws and making it less attractive for Argentines to spend abroad.

"Let there be no doubt that we prefer that everyone stay and spend their summers in Argentina," Mr. Echegaray said last month.

He later clarified that people who fully pay their taxes "can take vacations, buy things and do things anywhere in the world they wish to."

But travelers are learning that their pesos are no good outside Argentina, and saving them at home isn't an option, either, with inflation running at 25 percent or more a year.

Limited travel

Before traveling in June to southern Argentina and Chile, information technology executive Natividad Pozzo and her husband submitted sworn declarations to the tax agency and were granted permission to buy $570, which they exchanged for Chilean currency across the border.

Then their cash ran out, and they discovered peso-denominated bank cards don't work in ATMs outside Argentina. They only made it back across the border by persuading someone they met to buy some pesos.

A month later, Mrs. Pozzo tried to legally buy Uruguayan currency for another trip but was rejected.

As before, she filled out a form detailing the tax information of everyone with whom she would be traveling, their relationship to her, the addresses where she would stay and the purpose and length of her trip.

But the system said she could only buy currencies once every six months.

"Am I no longer free to travel?" Mrs. Pozzo wrote in an angry open letter to the president that she posted on social networks. "Are you forcing me to go to the black market to buy foreign currencies?"

Antoinette Ford, an American-Irish travel writer, tried to exchange Argentine currency at airports in Argentina, Miami, Washington, Dallas and London during a recent trip.

"Nobody would take the pesos," she complained. "Even the Argentines don't want the pesos. That's why they keep trying to get dollars."

Ms. Ford's Argentine boyfriend followed the rules before traveling to Italy and was allowed to buy just $1,200.

"That's the maximum he could get. Between that and monitoring your credit card, you're kind of [stymied]. They're going to know exactly what you carried and what you're spending it on. It's very socialistic or even communistic," Ms. Ford said.

Peso falls in value

The controls are meant to combat tax evasion; stem capital flight, which reached $23 billion last year; and keep enough dollars in the central bank's reserves to pay Argentina's debts while preventing already high inflation from spiraling out of control.

And they have worked, to a point: Argentines are paying taxes like never before, and the central bank claims $45 billion in dollar reserves.

But the peso's slide is accelerating: It has lost nearly 8 percent of its value against the dollar this year, more than in all of 2011.

Many Argentines tried to protect their wealth by investing in dollar-denominated real estate until other new rules forced that market into pesos as well, closing off an avenue Enrique Banuchi might have used to get his money out of the country.

"My wife and I recently decided to leave Argentina and move back to the U.S. However, if we sell our house, we would be getting pesos. What do we do with the pesos in the U.S.? The government won't sell any dollars to us. Do we have to go to somewhere to buy dollars illegally?" Mr. Banuchi asked. "What do we do with those dollars? Do we have to illegally transfer them out of the country? Life is not easy. We are trapped."

The black market values pesos at about 6.37 to the dollar, compared to the official rate of 4.65. Everyone wants to avoid falling on the wrong side of this gap, and people with overseas bank accounts or credit cards have learned they can profit from trading their currencies locally.

"You have to change those dollars to pesos, and you have to do it at the black market, because why would you want to lose 40 percent when changing dollars to pesos by doing it legally?" Ms. Ford said.

Bribery and fiscal responsibility

Governments have a phrase for this: money laundering.

And while it's legal to carry up to $10,000 across borders, keeping wads of money can be perilous in Buenos Aires, where someone has been killed in a home-invasion robbery every other day in the past few months.

Many times, entire families thought to have cash are tied up and tortured by teams of thieves.

Many Argentines have some access to credit or debit cards and use them to buy things abroad or online that are prohibitively expensive or hard to find in Argentina. Such purchases have doubled this year to more than $396 million as travelers make a sport of slipping their goodies through customs.

Travelers must pay a 50 percent customs duty on any purchases above $300 per trip, but underreporters are rarely questioned. When they are, bribes sometimes are requested.

One couple with five children recently returned from a U.S. trip loaded with personal electronics. The customs agent at Ezeiza International Airport spotted the goods as they passed through the X-ray and quietly told the husband to put $300 in a bag by the scanner.

"I thought it was a setup, that we would be arrested, but my husband said not to worry," confessed the woman, insisting on anonymity to avoid prosecution and fines.

Argentine officials say they're only working to ensure fiscal responsibility.

"All physical merchandise that comes in through customs must be declared," Mr. Echegaray said. "The reality is that we want to collect the taxes. It's not anything else."

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