According to sources from the Ministry of Economy, it is an effort to "promote international inbound tourism" and "formalise" part of the spending that today is dumped on the parallel market, where tourists get much more pesos for each dollar they exchange. The MEP exchange rate will allow them to achieve greater profitability, but within the margins of the law.
Since the beginning of the year, around 3 million foreign tourists have entered the country and spending has recovered by almost 85% compared to 2019 levels. These visitors - mostly from neighbouring countries - spent around US$2,500 in the first 10 months of the year and, according to official estimates, only 15% was reflected in Central Bank reserves.
Given that November and December are high tourism season months, it is expected that, with the new regime in place, an additional US$1.1 billion will be spent by 2022.
To the extent that it works, the new scheme will strengthen tax revenues - "not only from VAT and other taxes but also funds from the National Institute for Tourism Promotion" - and the Central Bank's reserves. They also expect it to reduce the exchange rate gap, given that "the volume of liquidation will push more supply into the MEP", which would help to deflate the exchange rate.
The target of the measure is not tourists from neighbouring countries, who have already recovered a large part of their visits to the country and are more accustomed to paying with physical banknotes, but residents of "distant countries". Especially Europeans, who are the furthest behind in the post-pandemic recovery process and who are used to using cards for almost all their transactions.
The benefit is for cards issued by a foreign bank, but additional information will be checked, such as whether the cardholder is domiciled outside Argentina and whether he or she registers recent income with Migrations. It applies to all types of card spending in the country (regardless of the category: gastronomy, shopping, cultural activities) and also for tickets and the purchase of tourist packages in the country.
According to official data, usually between US$200 and US$250 million a month are transacted with foreign credit cards, but today the flow is only around US$30 million, which shows a "diversion" to the parallel market. There have been attempts to normalise this situation before with other instruments that failed: the bimonetary bank accounts available for tourists from October 2021 and the possibility of settling the MEP in banks and receiving the money in physical banknotes, which was promoted by the former minister of the economy, Silvina Batakis.
The government hopes that the improvement in the exchange rate for tourists will not alter prices in pesos. "We will find a way to exclude those who cause deviations from the benefits," they said. "The cuit that violates the price agreement signed with the Ministry of Tourism falls out of the possibility of settling with this system."
Gustavo Hani, president of the Argentine Chamber of Tourism (CAT) said that "inbound tourism is the most backward in the post pandemic, along with corporate travel. The Previaje, on the other hand, made domestic tourism recover earlier, but this measure will change the situation and the sector was strongly waiting for it". "This will make the country much more serious for foreign tourists, especially for developed countries where the use of plastic is their way of life. We are betting that we won't see any more little videos of people paying for dinner with a lot of banknotes, which is painful for Argentines," he said.
The regulation will be published next Friday in the Official Gazette and no deadline has been set. The government says it will not need to ask the International Monetary Fund (IMF) for a "waiver" because technically it is not about setting a new exchange rate, but "it is not forcing people to exchange in the official market".
