To understand the currency crisis destabilizing the Argentine economy and threatening the administration of President Javier Milei, one need only cross the Andes mountains to reach the Chilean capital of Santiago. Outside a Courtyard by Marriott hotel, Carolyn Pérez recently observed scenes that reflect broader economic trends. Pérez recounts the experience of two Argentine couples as they loaded a significant quantity of large items into their vehicle in preparation for their journey back to Argentina. Initially, they succeeded in fitting a television into the vehicle; subsequently, another television was added; then a full-sized refrigerator was accommodated; and finally, they contorted themselves into the car, one after the other, before driving away as I observed, astonished. “It was shocking,” she asserts. The Milei administration faces considerable challenges in this context. Every month, hundreds of thousands of Argentines, similar to those two couples, are participating in shopping sprees overseas, which are depleting the hard-currency reserves that Milei needs to support the peso amid ongoing pressures. They are traveling to Rio de Janeiro, Miami, and the Uruguayan beach town of Punta del Este; however, for dedicated shopping excursions, Santiago continues to be the primary destination.
At a busy border crossing in the mountainous region, the number of Argentine vehicles entering Chile has risen by 50 percent relative to the previous year and has more than tripled since 2023. This year, the volume of Argentines traveling to Chile has exceeded the aggregate of visitors from all other countries combined. In total, the spending conducted with Argentine bank cards in Chile has seen an impressive rise of 438 percent this year, according to the consumer-segment data tracked by payments processor Transbank. In fashionable shopping malls like Parque Arauco and Costanera Centre, the distinct sound of Argentine Spanish, marked by its Italian inflections, resonates continuously, while the parking lots display the ubiquitous blue-and-white “República Argentina” license plates. Consumers are poised to purchase Jordan sneakers, Zara jeans, Lenovo laptops, and any other items they can accommodate in their luggage. The recent surge can be attributed to the policies implemented by Milei. In an effort to effectively manage soaring inflation, he has kept the peso largely stable against the dollar – a tactic that not only mitigates import costs but also communicates a wider sense of stability to a country plagued by years of economic distress. In this context, the peso has appreciated significantly, particularly when adjusted for inflation, making imported goods exceptionally affordable for the middle and upper classes in Argentina. Chile’s markedly lower tariffs in comparison to Argentina—almost 30 percentage points less on clothing, for instance—have resulted in thousands of individuals crossing the border each day to take advantage of these price disparities. The situation has transformed into a notable commercial prospect for retailers in Santiago, leading some to eliminate the necessity for Argentines to present a Chilean ID number when participating in online transactions. These shopping trips “are clear evidence of the currency misalignment,” asserts Andres Abadia. Abadia, akin to many other analysts, asserts that the peso is overvalued against the dollar by a margin of at least 20 percent, with the possibility of it reaching as high as 30 percent. This overvaluation, arguably more significant than other factors, is driving a currency run that Milei has characterized as a “panic.”
Maintaining investor confidence in an overvalued currency remains a significant challenge for policymakers, especially in the current environment, where there are growing signs that Milei is losing the popular support necessary for implementing substantial fiscal cuts and advancing his free-market reform agenda. With the critical midterm congressional elections on the horizon in late October, there is a noticeable trend of investors pulling their capital from the country. This is driven by concerns that Milei might deplete dollar reserves and be forced to abandon his backing of the peso. Milei and his economic team assert that the peso is fairly valued and have repeatedly committed, as they have for months, to preventing any further depreciation that could lead to a resurgence of inflation. Nevertheless, a pledge from the United States to support Milei – a close ally of former President Donald Trump – in averting a devaluation has not substantially alleviated the capital outflows. After a brief pause, they recommenced their activities last week. The outflow of hard currency in Chile has escalated to considerable amounts, totaling billions of dollars, leading Argentine customs officials to adopt more stringent enforcement protocols. Authorities are conducting inspections of car trunks and suitcases at mountain-pass border stops, imposing fines on individuals discovered transporting goods valued in excess of US$300. The spending-limit rule has been in place for decades; however, it has only been in recent times that travelers have reported officials enforcing it, though the enforcement appears to be inconsistent. “Even with a fine, it’s often still cheaper than buying the same thing in Argentina,” states Lur Carreras. Carreras, a travel agent focusing on tailored shopping excursions for young women, represents a growing cottage industry that has swiftly arisen to take advantage of the ongoing boom. Bus tours have been organized specifically for shoppers and social-media influencers, promoting strategies for finding bargains and offering personal shopping services—similar to Instacart, but with purchases made across the border rather than within the local area. One of those consumers is Gabriel Damiani. He initiated his enterprise several months ago, motivated by the significant income generated by his girlfriend in her capacity as a personal shopper.
Damiani articulates apprehension regarding the potential belated recognition of the business opportunity: should the peso undergo a rapid depreciation, as has occurred repeatedly in the historical context, the expansion is poised to terminate abruptly. Analia Raymundo considered this possibility as she left an H&M store in Costanera Centre, accompanied by her mother and daughter. “At certain junctures, purchasing may be advantageous,” Raymundo stated, “while at others, it may not be.” The present fervor shows scant signs of abating. Raymundo’s shopping cart was brimming that day with bags from H&M and a variety of other retailers. Just a few blocks from the Marriott, Nathalie Díaz observed a scene at the Hotel Boulevard Suites that mirrored what Carolyn Pérez had noted. Diaz, a hotel receptionist, recounts the sight of a family of Argentines systematically loading box after box of purchased items into their newly acquired Ford F-150 truck. Upon attaining full capacity, they retracted and advanced towards the border. Shortly thereafter, they retraced their steps and hurried back to the hotel, where the staff was ready to return two complete boxes of items they had overlooked. Milei defends the peso despite the expenditure of billions beyond Argentina’s borders.