Cuevas: The Knights of the Free Market

Explanation on how Argentina's different rates work and how to use cuevas, the Tinder app of black-market finance.

Welcome Avatar! Many non-residents ask me about how cuevas work in Argentina. These Knights of the Free Market allow you to exchange at more favorable rates, about 2x the official ARS/USD exchange rate at the moment of writing. Let’s dive into how they work, why they exist and how to benefit while in Argentina.

Initial disclaimer: technically, cuevas are illegal, since they are catering to the existing demand for dollars outside of the banking system; this is the closest thing to a free floating ARS/USD rate, that reflects the real on the ground demand for greenbacks. The government often cracks down on bigger operations, but buyers are usually not affected. That being said, nobody gives two pesos, and virtually the whole country is using this parallel market to buy and sell cash dollars.

Why do Cuevas exist?

As most of you know by now, buying USD through official channels is next to impossible in Argentina. Technically, consumers can buy up to $200/mo at the official USD rate ($280 pesos per USD), but when they try, this happens:

So safe to say the official rate doesn’t exist except for some importers and government officials.

How does a person thinking of buying their first home maintain the purchasing power of their savings in a country with negative real interest rates? Can you save in pesos to buy a property that is priced in dollars?

If your credit card is maxed out and want to travel abroad for 2 weeks, how can you survive with the 200 dollars that the Central Bank allows you to buy?

This is where the cuevas come in. Cuevas are exchanges on the parallel market, where you can freely buy and sell USD without any restrictions. Basically, cuevas are the market supply and demand. This is also why the blue dollar rate is close to 2x or more versus the official rate.

The free floating rate is called the Blue Rate because of these blue security stripes in $100 dollar bills. These new bills have preference at cuevas.

How Cuevas operate

Cuevas are mainly known for their operations with cash dollars, but they also carry out operations with checks, transfers abroad through mechanisms not regulated by the Central Bank and USDT/Bitcoin at the blue rate.

Generally, the operation with the client is closed by telephone or on Whatsapp. The purchase or sale price is communicated and the client gives his confirmation if he agrees.

Once the transaction is closed, it cannot be modified by any of the parties: it is a verbally closed deal or written in the Zuck app and must be fulfilled.

It doesn’t matter if the blue rate changes after you already agreed to the exchange rate quoted by the cueva.

This is why something like Bitcoin is not used that much for these exchanges, because settlement times can be higher, not to mention volatility. The cueva or you could end up with less dollars or pesos than expected.

Then you have to liquidate the operation. Cuevas take pesos and dollars, and swap them at the parallel market rates. Some regular transactions for a 3-4% fee include:

• Cash USD —> Pesos (and vice versa)

• USDT —> Cash USD (and vice versa)

• US Bank Wire —> Third party bank in US —> Cash USD or Pesos (and vice versa)

Luckily since 2018 many cuevas also accept stables, which makes it exponentially easier to get money in and out of the country without using ANY legacy banking.

Cuevas do not usually take exchange risks because they work with wholesalers. When the customer calls requesting a quote, the cueva asks the wholesaler for a quote and with that price on the desk, responds to the customer incorporating a spread (a premium, in this case).

That spread is their income. When the customer confirms, the cueva closes the transaction with the wholesaler. This is the reason why the operation cannot be cancelled afterwards.

Once you’re a regular customer at DoorCash

Once you’ve known your cuevero for a while, and there’s trust, cuevas are really the Tinder app of black-market finance. For example, if you want to get money into the country, they match the order with someone who needs cash outside, you send it from your offshore account to that third party US account, and the cueva gives you cash, and vice versa.

This can be in peso or USD bills. What I usually do is send a bigger amount, either through USDT on Tron (yes, this is Tron’s only use case, just because tx cost is the lowest and it’s widely used as a deposit method on centralized exchanges), and exchange that to cash USD with a little bit of peso cash.

That way, I don’t pesify a big amount and I keep exchanging USD cash to pesos as I need them throughout the month.

For bigger amounts ($20k USD+), sometimes cuevas can’t always find a counter party on the same day for the amount you need.

Another great feature of these knights of the free market is that once you know them personally, you can just text them on Whatsapp, send stables and a delivery dude will show up on your doorstep handing you a brick of pesos or US token bills, whichever you ordered (usually within 1-2 hours).

Things to keep in mind

The small head $100 bills are always worth less, and if newer bills are damaged cuevas will give less pesos for those as well. I usually call my cueva before going to the states and buy up all their torn bills at a discount, and then spend them in the US. Nice little arbitrage there, just for fun.

This “small head” or cabeza chica $100 bill has a -4/-5% discount, so try to avoid bringing those when you go.

Arbolitos on the weekend

When you first arrive in Buenos Aires and you get to Microcentro, you will notice a bunch of dudes on every corner shouting “cambio, cambio”. These guys are also called Arbolitos, or “Little Trees”, since they are planted throughout the city center.

The fact that cuevas work with wholesalers means that 90%+ will only offer exchanges during weekdays and market hours (10:30am-5pm from Mon-Fri).

Arbolito offering his services

In the city center you might find one or two Arbolitos who are still offering dollar exchanging on the weekends. So if you arrive on the weekend, getting to Florida street in the Microcentro is probably your best bet to get some cash pesos at the blue rate.

MEP Rate on non-Argentine Cards

Once you hear about the number of dollar rates in Argentina, it’s likely your head will start to spin, since there are over 20 different rates. Most of these are only interesting for locals, since they apply to the example above when buying dollars officially, paying a USD amount with a local peso creditcard, and imports and exports.

For foreigners, there are only 2 rates you should keep track of: the blue rate we discussed above (always applies to cash), and the MEP rate, which is +/- 10% below the blue rate:

The MEP rate is the rate you will receive when making a credit card payment in Argentina on a foreign credit card. Usually the process is that the amount gets debited at the official rate, and within 48 hours, the difference gets credited by the card issuer.

For Visa many have said this is direct, for MasterCard it can take a few days. Amex also works in a similar way to MasterCard.

This is nice since it means that you do not have to think about cash all the time, and can make bigger payments with your creditcard without having to carry a duffle bag full of peso bricks around with you.

Keep in mind though that many businesses ONLY accept cash, so you will have to exchange at least some dollar bills for pesos at some point.

Are there any risks?

In order to get in touch with a cueva, usually this happens through a referral of an acquaintance who has already operated at the same place. The main risk is on the side of the cueva, since they are technically running an illegal exchange in the eyes of the government.

So cuevas will make sure you are legit. Some ask for ID the first time, with some additional info, and will be reluctant to do a big amount if you haven’t swapped with them yet. Once you know them, there are no limits in terms of amounts etc.

Despite the fact that the cuevas have incentives to "do things right" and most that I work with are highly professional (they beat local banks by a mile), the risks for them are at the delivery stage (for example a cash delivery / cadete getting robbed on route to your doorstep).

To be honest that has never happened in all these years that I’ve lived here, but I’ve heard stories:

Example of cueva delivery gone wrong

Final thoughts

There are no official figures for the volume traded in the blue dollar segment, but it is estimated to be between $5 and $30 million dollars a day.

Thousands of people use cuevas every day, and as long as the government caps the purchasing of dollars through official channels, that will be the case for the foreseeable future.

Let me know in the comments if you have any additional questions about cuevas or exchanging USD in Argentina in general.

See you in the Jungle, Anon!