Last Wednesday, in the midst of financial turbulence and extreme tension in the currency exchange market, the government raided several “caves” in Buenos Aires City that operate with “blue dollars.”
While many people have used these informal exchange houses several times to get US dollars and don’t feel they are committing a crime at all, the fact is that this market for US currency is illegal. And those who operate in it are breaking the Currency Exchange Criminal Law.
TV networks aired footage of people carrying thousands of dollar bills in girdles attached to their waist and revealed the outcome of some raids. It looked like something out of a movie, with an intriguing plot. What is the backstory of “caves” and “little trees” (arbolitos)? How do they really operate?
This is the blue or parallel market dollar, which in other parts of the world is better known as the “black market dollar.” In Argentina, where people have very limited legal access to hard currency and the national tender, the peso, loses its value every week, the “blue dollar” is one of the main reference points of the economy.
The obstacles in accessing the exchange market in Argentina, along with low financial education, are why many people choose this option, thinking it is an easy way to get dollars and protect their assets. It’s become a natural procedure. As one market source says, “the blue dollar is the most vintage feature of currency exchange.”
Sources explain that it works like old markets used to, without the exchange rate boards or the madness you see in current operations. There are also different players along the chain. It is divided into brokers (corretas, for the Spanish term ‘corredor’), exchangers, caves and minor-league players.
The broker or “correta”, a key figure
“Corretas don’t earn commission; their job is not to move dollars around but to establish prices. The top brokers are no more than seven, and they don’t move dollars, they just make the prices,” the source details.
These actors, the source explains, are the ones closest to supply and demand levels. They are also the go-to people for those who wish to buy and sell: importers and exporters, business people, and, sometimes, even people connected to the government who they need to intervene in the market.
“In the old days, the corretas used to be, for example, former bankers, guys who had retired from the financial sector, but now there are younger people. Some of them work out of their offices in gated communities; others do so from luxury buildings in the financial district (known as ‘the City’),” they add.
The exchanger: a sort of wholesaler
The person in charge of the exchange operates as a wholesaler. They work with reference prices from the broker and add, for example, an AR$2 extra to that price. “These are the famous wholesalers; they contribute to price formation and general trading volume, but they are not the ones who decide what the price will be,” they say.
The exchanger, for example, provides prices to currency websites. “There is a wide range of people within the exchanger category: from currency exchange shops to former stock market brokers or financial agents who transfer money abroad,” says the source.
They also explain that the exchangers’ distinctive feature is that they operate more currencies than the broker — who focus on dollars, or sometimes euros. The exchanger also operates with currencies from neighboring countries.
“They usually work in downtown offices and the northern neighborhoods of the city, and they are very picky about who their clients are,” they add.
The caves: a diversity of operators
Caves are a whole different link in the chain. “They are hugely diverse: they go from a small financial agency all they way to a textile company. There are caves all across the country, and that’s where the unregistered volume lies,” the source says. Prices there can have a greater difference, as high as AR$10 over the broker’s value.
“The cave owner earns a difference because they operate regardless of the amount, starting at US$200. An exchanger, on the other hand, can demand a minimum of US$1000, while a correta operates with quantities of up to three zeros,” the source says. All caves, however, take their reference prices from an exchanger, and they add an extra commission on top. Hence, they are not important in terms of price determination, but they do provide liquidity.
Many of them work with “little trees.” These are the people standing on the streets chanting “cambio, cambio” (‘exchange, exchange’). More exposed than others, they usually carry backpacks. Whenever there are rumors of raids or police operations, like in the last days, they use fanny packs or money-carrying belts with pockets where they keep thousands of bills hidden under their clothes.
This is similar to those who use a delivery system, a feature lots of caves started implementing during the pandemic. They take the money in pesos or dollars (depending on whether they’re buying or selling) to the client’s home and exchange the bills there. This used to be reserved exclusively for bigger clients, but it became more popular during lockdown.
Minor-league: a market of acquaintances
Finally, there’s the “minor-league,” which —ironically— is huge. “It can be anyone exchanging currency, from a colleague at work to someone on a newsstand; they are the ones who can usually sell small amounts to an exchanger,” the source describes.
The crime of buying and selling blue dollars
Buying or selling illegal blue dollars is a crime under the Currency Exchange Law, which punishes those who engage in that trade. The penalties range from fines for up to ten times the amount of the operation — for first offenders — up to four years in prison for first-time repeat offenders. Second-time repeat offenders face a potential one to eight-year sentence.
Argentina’s Central Bank (BCRA) presses charges, but the sentence is later issued by a criminal-economic judge. The BCRA is in charge of collecting the evidence and then sending everything to the court. The judge can then issue a sentence in the context of a criminal case for false statements in currency exchange operations since the person who bought those dollars is not authorized to do so.
Judges don’t usually target retail buyers because the size of the economic damage is too low (the crime is usually committed for lower amounts). But most of them do prosecute caves that sell fortunes in blue dollars.