Passive income strategies for financial freedom

How to survive an economic collapse: Argentina

The economic crisis in Argentina. How are the Argentinians surviving?

This article has been researched by Franco Bonabello,  Licenciado en Ciencias de la Comunicación. He is an Argentinian and has extensive knowledge on Argentine society. Edited by Jim Reynolds.

An economic crisis has ravaged Argentina in the last five years. The rate of inflation is around 30% every year, unemployment has grown from 7% to 11%. The middle class is losing all they had worked for and becoming poor.

If we want to understand the impact of a crisis one has to analysis how society and the economy are changing. In this article, we will tackle review how Inflation, Taxes, Investment, Employment, Pensions, Food and Medicine and finally Love are changing in the crisis.

You might wonder why write about an economic crisis here? A blog focused on Passive income, Crypto and Money. If one is aware of what he is preparing for, he is more motivated to do so.

Inflation

“Los salarios van por la escalera, lospreciospor el ascensor” – This is a saying that means literally the wages go through the stairs, the prices through the elevator, meaning of course that the wages can never go as fast as the prices.

Argentina has had high inflation for much of its history. Inflation has doubled or even tripled the inflation of the developed countries. The average rate of inflation during the last 4 years is about 33 per cent. Salaries do not keep up with the salary increases which have averaged around 30 per cent per year. The prices of bread, milk, flavour, meat and vegetable prices grow faster than inflation

What do the people do to avoid the monster of inflation?
There is no an easy solution when inflation is so high.

What people do:

  • Put money for 30, 60 or 90 days as a term deposit in a bank.  Banks are offering interest rates between 35 and 40 per cent.
  • Stock or to buy canned goods, that expire in two years. Even if the price will keep on growing the next two years, in the long term less money is lost.
  • Earn Foreign currency
  • Reduce the amount they pay in electricity and gas bills, using the resources as needed and avoid the excessive use of air conditioning in summer or central heating.
  • Buy electronics and house appliances online. Some supermarkets such as Garbarino, Fravega, and even Carrefour or Wallmart have special offers during Fridays or once a month, with discounts in electronics and the possibility of financing with very low interest.
  • Buy in the “Mercado Central”, or Central Market, where the same people who produce offer their products, so the prices are lower than in supermarkets. This is an option only for the inhabitants of Buenos Aires, where it is located.
  • In Argentina we have a saying, “in case of high inflation, buy currency or brics” (we say literally ladrillos/brics). Historically the best way to preserve your money is to buy euros, dollars or pounds, that won’t lose their value over time.  Also “ladrillos” are a very good option, buying little apartments for rent, or even a lot in parking can be really good investments.

Taxes

The country has many types of taxes such as Value-added tax (VAT), Turnover tax (gross income tax), Tax on credits and debits on bank accounts, Import & Export duties, and Social Security Taxes Starting a business in Argentina takes an average of 25 days, according to the World Bank, four times more than in Chile or Australia. Because of this, people are discouraged to open new businesses.

As a result of this investment is very low. Investment is focused on agriculture or areas that are already being exploited by the main commercial partners such as Brazil, EU, China, and Chile.

What kind of businesses are flourishing during the crisis?

  • Black market foreign currency exchanges.  The borders between Argentina, Paraguay, and Bolivia, are hot spots for the black. These have always been a there crisis or nor a crisis.
  • Selling of good without taxes a tax receipt. This is something common even in the good time, and it happens all over the world.
  • Export Business can flourish. For example, leather goods export
Casa Rosada Argentina
Casa Rosada Argentina

Investment

Argentinians typically do not invest, because there has been lack of access to investment products such as stocks, bonds or currencies.

Recently the Merval (Mercado de Valores de Buenos Aires) has started offering opportunities for people to invest, and the access to the internet has made it even easier. There are other services such as Invertironline.com and Invertirenbolsa.com.ar

Argentinians prefer to invest in the dollar. The country has the second highest use of the US Dollar. These $ are in safety deposit boxes rather than bank accounts.

How are people investing?

  • The Dollar:  After decades of high inflation in Argentina, the only way to preserve the value of your money is by buying a more stable currency. This is the only way to preserve purchasing power.
  • Savings Accounts:
  • If you have an account in foreign currency, the interest rates are about 1,5 and 2,5 per cent every year.
  • People who have saved during the years pre-crisis, invest in real estate, cause in spite of the economy, the prices in dollars of the apartments and houses keep on rising every year.
  • In the centre of Argentina, known as the “Pampa’s”  where the most fertile lands can be found. People invest in arable land to plant soy and sell it.
  • There is a flourishing of stores that sell “loose / lâche” things, so you can control the amount and the price of what you take and as they do not sale main/top brands, you can save money going to those places.
  • To save money, those who can buy in bulk from a wholesaler.  The others who live from paycheck to paycheck cannot buy in bulk. They have to pay higher prices. Some cities have a hipermercado, usually a Carrefour Express in the outskirts. This is where the best deals are found.

Employment

Today unemployment is at 11% in 1976 it was 3%. 35% work “en negro”, the employer does not pay for social security, pensions or taxes. That saves the employer 19% of the salary.

What are people doing to earn more money?

  • Working in black
  • Working online: The downside is that the main webpages for freelancing are in English. So apart from having a degree, you need to comprehend English enough to start a career as a freelancer. Argentina has a competitive currency and an Argentinian employee could cost two or three times less than a European or American one.
  • Working multiple jobs

Pensions

Argentina has a population of 40 million inhabitants, 7 million of which receive a pension, that means that 100 per cent of the population above the ages of 60 or 65 have a pension. The crucial thing is not how many people receive a pension, but what can they really do with that pension.

To get an idea, the average wage for an employee for 8 hours per day, 48 hours a week?, is 20.000 Argentinian Pesos and the pensions are around 9.000 pesos.

How are pensioners managing?

  • Older people have to keep on working, usually part-time jobs.
  • They reduce the amount of food they eat
  • They live with relatives to reduce costs as renting an apartment could cost as much as half of their pension
  • They change their medications to generic ones in order to save money
  • Instead of buying detergent, bleach, and many other products used for cleaning at the supermarket. They buy them in specialized stores for a fraction of the price and choose between a variety of brands.
  • They try to reduce energy consumption using energy saving lamps, not using the air conditioning, using fans, filling the washing machine full of clothes.

Food and Medicines

There are no food shortages in Argentina at this time but the choice is limited. There are expensive food and medicine brands but also generic brands. Sometimes the quality is quite similar.

The state has done a good job of keeping good services in health care, pensions and education. They may be delays in the arrival of certain drugs, but the country has a laboratory that produces generics, and the medications for Oncology, HIV, Immunosuppression and other diseases are always included in the annual budget, so they are always available.

How are people coping with the crisis in food and medicine?

  • During the crisis, Argentinians tend to eat less meat, fewer beverages, and more hand made products.
  • There are organizations called “pro huertas” that sell lettuce, carrots, tomato, eggs, at really cheap prices and the money goes directly to the producers of the farm, those who work it every day, and not to intermediarios.
  • It is difficult to stay healthy because all the cheap foods are unhealthy flavour based, pasta, polenta, bread, rice. Even the fruits are really expensive. The lucky ones are people who can produce their own healthy food.

Love during the crisis

The crisis can change many things, but Argentinians know their way around love. The Italian roots are still strong. In the “plazas” you can always see a few young lovers holding hands walking and looking into each other’s eyes every few paces!

When it comes to marriage time, these lovers, have to do it on a shoestring budget. Then they spend the first years living in one of their parents home.

Family planning is important during the crisis. Argentinas love big families but during the crisis, people can afford only one kid. Young couples do wait for the situation in order to grow the family, but Argentinians know that the next crisis is around the corner.

For those lovers, they appreciate the real things in life such as the birth of their kids. These bonds are much stronger than money!

What is the secret sauce to coping with the Argentinian perpetual crisis?

Argentina seems to live in a  state of perpetual crisis. There is a saying among Argentinians that says “ If you ask an Argentinian about the last crisis, he would probably reply.: Which one, the one of the year 83, 89, 95, 2001, 2010 or the actual crisis”

The country is so used to living from one crisis to another that it seems that life for Argentinians remain the same. In spite of the lack of money. In spite of the limited choice in goods. What really makes the country go is the energy of it people! The mixture of Latino and the south Italian way of living highlights the importance of human relationships, of family and affection. These are things money cannot buy.

Argentinians tend not to be sad about the crisis, instead, they hug and kiss each other every morning and this gives them strength.

They chit chat about the crisis over an espresso cafe in one of the many bars while the sun rises of their crisis-stricken country.

On weekends they spend time with their family and children. Typically they share a big pasta meal with the whole family talking about soccer and life.

Human relationships and strong friendships are very important to Argentinians and this is what makes them go through this state of perpetual crisis. They teach their children because it is the best tool to survive any crisis.

We thank Franco Bonabello for sharing his insights on the Argentian Crisis.

The conclusion rang a bell! The different categories of passive income, where I discuss the different ways of looking at assets, it is not just about money. If your country is in a crisis or approaching one you can start working today on your financial freedom. Read our analysis of the best passive income books, understand the habits of the passive income millionaire and how you can start a passive income business with no money.

You might also be interested in the Guide: Passive income ideas in total global collapse scenario- TEOTWAWKI

 

Not investment advice. Not financial advice. Consult your financial advisor. Not a recommendation to buy, sell or hold. The staff of this site may own these digital asset/s mentioned on this page. Investing is risky and you may lose all your capital. See full disclaimer.

Keep in mind that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. We try our best to keep things fair and balanced, in order to help you make the best choice for you.

Author: Jim Reynolds
Jim Reynolds. Is passionate about finance, passive income and cryptocurrencies. He writes about his passions on NodesOfValue.com. He has worked in the tech and financial industry for a few decades. He holds a masters in business admin and a bachelors in IT. All his writings are not investment advice.

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