The economic crisis in Argentina and the political crisis in Chile are leading people to seek economic protection options.
Two of the most important countries in South America are experiencing serious crises this year and seem to be turning to Financial Peak for economic protection: Argentina and Chile.
The two South American countries are experiencing different scenarios, but there is no doubt that they are in crisis: Chile has been experiencing an economic and social crisis for more than a year, which has culminated in the approval of a plebiscite to overthrow the constitution, a legacy of the period of dictator Augusto Pinochet. Argentina is experiencing the serious consequences of three years of recession aggravated by the pandemic, dragging with it the “eternal” exchange crisis, with an increase in inflation, a rise in the dollar and an increase in poverty.
Argentina experienced four years of neoliberalism at the hands of former President Mauricio Macri, who handed the country over in recession to the Kirchnerist Alberto Fernandez, who did little to solve the problems and could be said to have worsened the situation by intervening in the purchase of dollars by the country’s citizens. Chile, by contrast, has privatized most public services, including social security and health care, since Pinochet, who over the years has worsened social inequality until the explosion of protests against President Salvador Piñera in 2019.
Macri’s failure and misery growing with Fernandez
The economic policies of the neoliberal Mauricio Macri, who promised “zero poverty”, control of inflation and foreign investment, in the words of the former president himself, have failed. He delivered the country with indices of extreme poverty (38% of the population, 8% in miserable conditions), an explosion of inflation and devaluation of almost 40% of a currency that was already fragile and with little foreign investment.
The neoliberal failure lit the country’s Kirchnerist flame, which had been extinguished, and led to the election of Alberto Fernandez last year. With the advent of the pandemic, Argentina made a closure that was relatively successful in public health, but it was an economic and social failure.
Almost seven months after the quarantine, Argentina is poorer and more unequal, there has been a lack of essential products, inflation has shot up and the government has now intervened in the possibilities of economic protection of the population itself, limiting the purchase of dollars to $200 per person and with a 35% tax on purchases with credit and debit cards using dollars.
The situation is so serious that banks and citizens are already negotiating in dollars, replacing the peso and generating a heated black market. As a result, the country’s foreign exchange reserves have melted to only 37 billion dollars.
Former World Bank director Otaviano Canuto tried to explain the Argentine crisis to Poder360 :
“The current restrictive measures were already harsh, and the government made them even tougher, hitting individuals and companies, going far beyond the ‘invading’ foreign investors. In the case of companies, the government is trying to force them to restructure their foreign debts”.
The scenario seems to be driving the crypto-currency market. Coindance’s data on the LocalBitcoins P2P exchange proves this thesis. The exchange registered its highest volume of transactions in Argentina in June 2020, with more than 125 million pesos traded during two consecutive weeks.
The country, which already has a habit of saving dollars for economic protection since the 1990s, now also resorts to crypto currencies in these cases. With the worsening of COVID-19 rates in the last two weeks and a series of protests in the country, the population’s fear has also turned to Bitcoin.
Trade at LocalBitcoins was less than 70 million pesos in early October, before the government announced more interventionist measures to buy dollars, at more than 90 million pesos last week, a significant 23% increase in weekday trade volume at BTC.
In Chile, the violence of the political crisis and the end of Pinochet’s
Argentina’s Pacific Ocean neighbor, Chile, is experiencing violent political turmoil that began in October 2019 and has not even cooled down during the pandemic. The liberal government of Sebastián Piñera had a small victory in proposing a plebiscite last week, overthrowing the ultraliberal constituent assembly inherited by the Augusto Pinochet dictatorship, one of the bloodiest and most perverse on the continent.