RIO DE JANEIRO, BRAZIL – In the last two years, the dollar’s value in Argentina has almost doubled, and in the previous five years, it has multiplied by more than six. In the area of Puerto Iguazú, this type of exchange rate fluctuations, in which the currencies of one side or the other gain value for the other (in this case, the Brazilian real and the Paraguayan guaraní against the Argentine peso), cause consumption to focus on where it is cheaper to buy.
In the triple border, the twin cities of Puerto Iguazú, Foz do Iguaçu (Brazil), and Ciudad del Este (Paraguay) generate a particular economic feedback case addition to sharing customs and quirks.
Due to the current exchange rate difference, which allows all food products, tourist services, and fuel to be at least 50 percent cheaper for Brazilians and Paraguayans, today the inhabitants of Foz do Iguaçu, and Ciudad del Este obtain their supplies from Puerto Iguazú, a city known worldwide for being home to the Iguazú Falls, one of the seven Natural Wonders of the World.
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This exchange difference causes long waits in the border area, both for the entry and exit of foreigners, at gas stations in search of fuel, in supermarkets, and butcher shops.
The long lines at the gas stations were the first problem after the opening of the Puerto Iguazú border after months of closure due to the Covid-19 pandemic. It was the first tourist corridor in Argentina that allowed the entry of citizens from neighboring countries on October 27, 2021, and from all over the world from November 1.
With the increase in demand, the lines reached up to 800 meters long in the four service stations of the city, which has a little more than 80,000 inhabitants (although many of them are of foreign origin, naturalized Argentineans, who arrived from neighboring countries looking for a better future and usually migrate back to their countries when the economy does not favor them).
SPECIAL SCHEDULES FOR SALES TO FOREIGNERS
The difference in fuel cost for Brazilians justifies the wait of almost 6 hours: according to them, the value of a liter of gasoline in Foz do Iguaçu is 7.25 reais, while in Argentina, it is the equivalent of 2.80 reais per liter.
Faced with this situation, the authorities resorted to regulation since 2015, which required differentiated lanes to order the queue. However, this regulation did not give results since the problem is the scarce supply against the disproportionate increase in demand.
That is why the Honorable Deliberating Council, in charge of regulating ordinances or municipal laws, determined a specific schedule in which the sale of fuels to foreigners is allowed.
The ordinance prohibits the sale of fuel to cars with adulterated fuel tanks. This modality was implemented by several vehicle owners who sought to illegally sell fuel to foreigners or send it to Paraguay in smuggled drums with boats that cross the Paraná River, which they reach through unauthorized border crossings known in the area as “pique” or “bajada”.
The illegal sale of fuel became evident when last Monday, December 27, a vehicle with a contaminated fuel tank exploded at a gas station, leaving no fatalities. According to police investigations, this vehicle was used to transport fuel to neighborhoods for resale.
To contain smuggling, the deputies of the province of Misiones filed a complaint and demanded greater controls by the competent police authorities.
Due to smuggling, the high demand could lead to a fuel shortage in the city and surrounding areas. “The situation is complicated not only by the high demand but also by the fact that oil companies do not increase the sales quota to gas stations because their demand increases. This limitation of sales is a way of pressuring the government to update prices that have been frozen for several months. This situation is compounded by illegal sales that are not controlled by the authorities,” explained Faruk Jalaf, president of the Chamber of Service Stations and Related Industries of the Northeast.
ASYMMETRIES PROMOTE ILLEGAL PRACTICES IN THE BORDER AREA
The exchange rate difference and the lack of control leave the way open for the development of the illegal market, not only for fuel. A large part of the food entering Puerto Iguazú is destined for unlawful border crossings.
Even a good percentage of people call themselves “pastors”, dedicated to smuggling goods from one country to the other across the Paraná River.
The most common products leaving the country through illegal crossings are wine, sweet bread, meat, chicken, eggs, beer, diapers, and cleaning products. The security forces are aware of the operation but do not carry out operations with positive results that lead to the arrest of the smugglers.
Although the authorities do not make any statements on the matter, the Paraguayan media constantly report that smuggling affects the local economy. At least twice a week, there are reports of police operations that seize contraband merchandise coming from Argentina, specifically from Puerto Iguazú.
On the other hand, the exchange rate difference favors a few who can save in reais, dollars, or guaraníes since the national government regulates the purchase of foreign currency. In Puerto Iguazú, four exchange houses were operating before the beginning of the pandemic.
However, the sale of pesos illegally can be seen in the lines of service stations, where people engaged in this practice, known in Argentine slang as “abolition”, pretend to sell drinks and nougat, although their business is the exchange of foreign currency.
All these situations in the triple border move to the sway of the economies of each of the countries that comprise it.
The asymmetries are cyclical, in the 90’s it was the Argentineans crossed the bridge and could buy up to three products with the money with which they bought only one in the country, during the “convertibility” when a peso was worth the same as a dollar.
Today, the Argentine side has become cheap for Brazilians and Paraguayans.