Argentina is now the primary candidate for Bitcoin adoption.
High GDP.
Crazy inflation.
Corrupt stupid government.
Totalitarian-style financial laws.
Easy widespread internet and mobile access.
Not enough dollars.
High GDP.
Crazy inflation.
Corrupt stupid government.
Totalitarian-style financial laws.
Easy widespread internet and mobile access.
Not enough dollars.
His current method of paying them is to pay a US residing relative of theirs who is basically holding the money as a stateside retirement account for the Argentinians.
He offered over a year ago to start paying them in BTC so that they could actually spend they money he was paying them (for which I'm sure they are kicking themselves for turning down now).
So while there are all sorts of issues with BTC in terms of liquidity, exchange and security its probably a mark of how bad it is in Argentina that BTC looks sane and stable in comparison.
There are legal ways also, you can find the details in the Globant's SEC filling: https://www.sec.gov/Archives/edgar/data/1557860/000114420413...
In that way you can buy and sell dollars using the black market currency in a legal way.
Buy USD-denominated Argentine government bonds in the USA (or have your customer do that). Sell the bonds in Argentina, getting more pesos than you would have through the normal mechanism.
I don't see why anybody (in country) with dollars would bother selling them for bitcoin, and I don't see why anybody with bitcoin is going to be excited about pesos.
So you get a little trickle.
Argentina does not allow money (in significant amounts) to leave their borders.
Bitcoin is a world-currency.
In order for an argentinian to acquire a Bitcoin, he must pay taxes in excess of 50%, be limited to a few hundred USD in purchases per month, and find somebody who owns bitcoin to take argentine pesos which are in an inflationary spiral at the moment: http://www.xe.com/currencycharts/?from=USD&to=ARS&view=10Y
The value of Bitcoin is doing the exact opposite of argentine pesos.
Anybody holding Bitcoin would have to be insane to exchange them for argentine pesos.
You'd be in a competition at some point with the larger "Western" Bitcoin variant, but that's not an issue in the short term.
The global BTC currency is irrelevant to this use-case which is to provide a local people group with a currency option that cannot be manipulated by the same people that screwed up their original currency option but which is calibrated to the economic output of the local people group (e.g. it's not too expensive relative to the per-capita GDP of local Argentinians).
It doesn't matter that BTC exists globally, or at all. The reason I even mentioned or suggested BTC was because (a) it exists, (b) it has certain properties that make it good at avoiding manipulation, (c) that it can be repurposed.
If you replaced Bitcoin's genesis block with a new one, and got a bunch of people to agree that this was for valuation wrt a particular economy (e.g. because Argentinian BTC miners mine on the chain beginning with this block, and few people in the global community do because there isn't an incentive for them to), then what would happen is that the value of that entirely different and distinct economy ought to come to represent the value gained by that group of miners. Who, hopefully, are in Argentina and who trade with other Argentinians. Does that make sense?
Economic unity is very attractive, especially considering the financial/legal hurdles that come with reaching customers in a dozen different currencies in a dozen different national jurisdictions.
So the proposed solution is to:
a) create a crypto currency for south americans only
b) ask other countries who want to buy your resources to pay in south american coin
c) convert south america coin to bitcoin (how?) once you have transacted with the rest of the world to re-enter the world-currency market
Good luck with that idea. It's never going to work.
Even if Google was based in argentina, and accepted 100% of it's payments in Bitcoin, it would only account for about 10% of Argentina's current GDP.
If no one has any bitcoin then no one can work for bitcoin.
Of course, Argentinians could attempt to bootstrap their own cryptocurrency..
It's ironic that one of the cryptocurrency experts is Argentinian: http://bitslog.wordpress.com
Under such circumstances, how is anyone going to keep bitcoin out of Argentina?
I just don't see how enough of them can get in for it to matter all that much.
Remember, money doesn't have intrinsic value. There's no reason a bunch of pissed off middle class educated people can't en masse adopt a new way of trading resources.
If you (a bitcoin seller) were to acquire pesos and hold them, it wouldn't work too well, as your money would get inflated away, eliminating and reversing any profit. However, you could instead (i) use them for transactions, or (ii) sell them to somebody else who has, say, dollars, but needs to buy assets in Argentina.
These people, not having found out the state of Argentina (keep in mind that find out about all these in english is even harder than in spanish) will not arrive with much cash to exchange. And this is not a hypothetical, I've seen this a couple of times already.
The problem is the economic environment making impossible to survive for a standard business. The tax pressure is incredible high and there are not incentives for doing fair businesses.
Imagine this simple case: a company exports for ~7 pesos per dollar while imports its components for ~11. And we are not talking yet about the paperwork and bribery involved in commercial transactions.
You can say the same today. The problem with Argentina is that while it got a GDP equal to Canada in last century, the money was never good distributed, like in Canada, Germany or France.
So just a couple of people will own more than half Texas(Argentina is big) while the rest of the population could only live as servants.
Today big latifundistas still own most of Argentina, and they buy the gobertment like in the past.
Bitcoin won't make the country prosperous any more than black-market dollars will.
And it allows to bypass the stupid laws and let's you do the online shopping almost anonymously.
You can buy virtual stuff like books, software, etc.
Also with bitcoins one day you will pay X and the other X/2 or 2*X.
http://labitconf.com/ http://www.bitcoinargentina.org/
A lot of argentinian hackers I spoke to are very well-informed about bitcoin.
Currency controls like this are the hallmark of a corrupt regime trying their best to pretend there isn't any problem with printing a whole lot of money.
Maybe they've been listening to former Enron advisor and Nobel laureate Paul Krugman over at the NY Times. He's adamant that nothing bad can come from "printing a whole lot of money", and that it's just the ticket to get a problem economy going again—the more the better.
[1] Paul Krugman's Very Strange Ideas About Argentina's Economy: http://www.forbes.com/sites/timworstall/2012/05/04/paul-krug...
"Argentina entered the new century in straits similar to those of a disquieting number of European counties today. With the peso shackled to the dollar, it had (as Greece, Spain, and the other so-called PIIGS on the periphery of the Eurozone do today) what appeared to be an irremediably overvalued currency sapping the competitiveness of its exports, along with mounting difficulties servicing its debt as tax receipts dwindled in the face of recession. The counsel of the IMF was naturally for austerity. The Argentines should maintain dollar convertibility—that is, a pricey currency—and trim public expenditure in order to cover interest payments. . . . [Yet] austerity in the face of gigantic indebtedness . . . yielded precisely the devaluation and default it was supposed to prevent. If the Argentine experience is truly as exemplary as the IMF once maintained, the story can’t be a heartening one in light of the turn toward austerity today being undertaken in Europe and threatened in the US."
In contrast, the Forbes article is entirely unclear. It fails to explain the key point that the IMF was not just advocating depreciation, but was pushing for the sort of restrictive government austerity that has been forced on Greece.
"it’s also difficult to see quite what is unorthodox or heterodox about following the standard IMF prescription for a country in such problems. Default, renegotiate the debt burden and devalue the currency to try and spark an export boom."
Krugman's point is simple and stands. A simple comparison of Argentina's GDP growth post-2001 with Greek growth post-2008 shows this plainly enough: one economy recovered quickly and the other is still sinking.
In 2001 we had ~10 years of 1%-2% annual inflation with the “convertibility” plan, that fix the exchange as $US1=$ARS1. So the dollar was 30% undervalued. But during that time, there was very little money emission. Some provinces had to make their own money, it was technically a bond, but it looked like a bill and was used like a bill. One of the few successful case was the Patacón ( http://en.wikipedia.org/wiki/Patac%C3%B3n_(bond) ). It was successful, because it was emitted by the biggest province, it was one of the last bonds created and it lasted only for a few years. Most of the other province bond started with a $X1=$ARS1=$US1 but after a few years the exchange rate became something like $X1=$ARS0.7=$US0.7, and the public employees of the province were paid in the bonds, as if still $X1=$ARS1=$US1.
Now we have a 20% - 30% annual inflation. Interestingly, the dollar is 30% undervalued. But the emission is so height that we used all the latin alphabet to name the series, and more emission will be translated directly to more inflation.
And bitcoins can easily be exchanged by US dollars, so is not a bad a idea for Argentinians after all.