Argentineans Find BMWs, Bitcoin and Gold as Inflation Hedges

Argentines are buying more BMWs, Jaguars and other luxury cars as a store of value as inflation decimates their deposits and pummels the nation’s bonds.

Purchases of cars from Germany’s Bayerische Motoren Werke AG (BMW) and Jaguar Land Rover Automotive Plc, owned by India’s Tata Motors Ltd. (TTMT), jumped the most in April among brands sold in Argentina. The sales were part of a 30 percent surge in car sales from a year earlier that was the biggest increase in 20 months, according to the Argentine Car Producers Association. While used-car prices rose in line with inflation last year, or about 25 percent, peso bonds tied to consumer prices fell 13 percent. The drop was the biggest in emerging markets.

Car sales in Argentina increased by the most in almost two years last month as a ban on buying dollars made Argentines turn to vehicles to protect savings against the fastest inflation in the Western Hemisphere after Venezuela. Luxury models are becoming more attractive because they are imported at the official dollar rate, said Gonzalo Dalmasso, vehicle industry analyst at Buenos Aires research company Abeceb.com. Argentines with savings in dollars are able to purchase cars at half the cost by trading in the unofficial currency market.

The decree prompted BMW to export rice and Porsche Automobil Holding SE to begin exporting olives and Malbec red wine. Shizuoka Subaru Motor Co. agreed to export chicken feed, Hyundai Motor Co. began sending soy flour to Vietnam and Mitsubishi Motors Corp. (7211) started shipping peanuts.

Argentines are buying cars, gold and even virtual currency such as bitcoin as they look for ways to preserve their savings as the peso is forecast to fall 17 percent this year.

Argentina’s dollar-denominated bonds aren’t a better alternative as a U.S. legal dispute on repayment of the nation’s defaulted debt caused average yields to soar to 13.92 percent, almost three times the average in emerging markets, according to JPMorgan Chase & Co.

The notes have plunged 10 percent his year.

The rate banks pay for 30-day deposits of more than 1 million pesos was 15.38 percent on May 10….

The cost to insure Argentine debt against default within the next five years through credit default swaps rose 107 basis points to 2,770 basis points, according to data compiled by CMA Ltd.

While inflation and a gap in the exchange rates is fueling sales, the same reasons are also deterring investment in the car industry, said Cristiano Rattazzi, President of Fiat Auto Argentina SA.