Argentina's recession-hit SMEs seek Bitcoin exports

"I was skeptical at first," said the owner of a flophouse in Buenos Aires.

“But I took the risk and it turned out to be worth it,” she said. By accepting digital currency as payment, she was able to sell her bitcoins at Argentina’s unofficial currency workplace, where the exchange rate is 50% higher than the official currency rate.

Business in South America's second-largest economy has been devastated since Argentina imposed ongoing capital controls in 2011. Tight restrictions on foreign exchange have left the official peso overvalued, exacerbating a recession and double-digit inflation.

Argentina's complicated economic situation has not been effectively resolved under the left-wing government led by Cristina Fernandez, and the use of Bitcoin among small businesses has tripled. According to statistics from Bitex, a regional Bitcoin exchange, Argentina's Bitcoin use is growing faster than any other country in Latin America.

Recent attacks on currency exchanges and efforts by the country's intelligence services to curb speculation pushed the Argentine peso to its lowest level on the black market this week since Argentina defaulted on its foreign debt for the second time this century last year.

However, the presidential election in October is expected to bring more favorable regulatory measures to the market. Investors hope that the first task of the new government should be to lift the previous capital control policy. This topic has caused domestic debate, and people are discussing how to solve the current "investment shortage" dilemma in Argentina.

José Luis Espert, an Argentine economist, said: "The previous capital control policy inevitably led to the current consequences. It is more difficult to get rid of the impact of the policy than to correct it."

The two presidential candidates in Argentina now hold completely opposite views on the domestic economic situation. Buenos Aires Mayor Daniel Scioli, who is supported by current President Fernandez, prefers a gradual approach, but people are worried about whether the government he leads can successfully implement the strategic deployment for the economic situation.

The other candidate - Maurcio Macri, who is backed by capitalists - is more inclined to quick solutions.

Although economist Espert advocates a swift move away from capital controls, he also said it must be accompanied by an "economic plan with a solid technical backing" to restore confidence in the market. "Without a credible plan, a full-on brute force removal would be more deadly than a lukewarm solution," he explained.

Mr. Urtubey, vice president of the Argentine Federation of Industry, doubts that tough measures will be effective. Although capital controls played an important role in Argentina's industrial sector last year, and foreign currency is important for importing goods needed for industrial production, he still worries that central bank reserves cannot withstand the pressure of sudden cuts. He said: "The remedy will be more deadly than the cause."

These two contradictions explain why economist Espert believes that Argentina's unstable economy, which has lasted for half a century, is still trapped in a vicious cycle.

Pessimistically speaking, Argentina's economy will still be sluggish in the future. However, this is good news for Bitcoin, although it is still in its infancy in Argentina, with only 6,000 to 8,000 users.

Franco Danie Amati, co-founder of Bitcoin Argentina and something of a Bitcoin poster boy for Buenos Aires’ financial district, is optimistic about the digital currency’s prospects in his country, even though half of the city’s population still keeps their income in the formal banking system.

He said: "Recurring inflation crises, capital controls and overall economic repression have made life increasingly difficult in Argentina. More and more people are looking for solutions to their problems, and Bitcoin is a perfect outlet."