Foreign Exchange Black Markets in Latin America

Foreign Exchange Black Markets in Latin America

Foreign Exchange Black Markets in Latin America

Foreign Exchange Black Markets in Latin America

Synopsis

Foreign exchange black markets in Argentina, Brazil, Colombia, Jamaica and Peru were studied during the period 1990-93. This group of case studies presents a broad view of the phenomenon in Latin American at the beginning of the 1990s. This is not a traditional economic analysis of foreign exchange markets, for many reasons. Most importantly, since black markets are illegal by definition, they are not recorded in offical statistics and the participants are not easily identified. Nevertheless, these markets are often widely used and well known to people living in the Latin American countries, so it is possible to paint a reasonably accurate picture of them.

Excerpt

This book presents the results of two detailed studies of foreign exchange black markets, in Colombia and Peru, that were undertaken beginning in 1990, and then a series of additional country studies and issue analyses that were carried out daring 1991-1993 to produce a broader picture of this phenomenon in Latin America at the beginning of the. 1990s. This is not a traditional economic analysis of foreign exchange markets for many reasons. Most importantly, since black markets are illegal by definition, they are not recorded in official statistics, and the participants are not easily identified. Nevertheless, these markets are often widely used and well known to people living in the Latin American countries, so it is possible to paint a picture of the black markets that reasonably represents reality.

A black, as opposed to a parallel, market is a market for foreign exchange transactions that operates outside of the law in a given country. Parallel markets are any foreign exchange markets other than the ones operated through a country's commercial banking system. The legal, parallel markets in Chile, Ecuador, Mexico, and several other Latin American countries in the 1980s and 1990s have offered legal access to foreign exchange in those countries through intermediation of cambistas or casas de cambio, who are licensed dealers in foreign exchange. Even in countries such as Argentina and Colombia, licensed cambistas carry out legal, parallel market foreign exchange transactions. In these latter countries, however, the parallel market is accompanied by a huge, unrecorded market for foreign exchange, the black market. Black market dealers in foreign exchange may be licensed cambistas, stock broker firms, travel agencies, or street vendors; their business is "black" because the transactions are not recorded legally; no taxes are paid; no government permissions are obtained; and in short, they operate outside of the legal financial system of the country.

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