More From Argentina: Middleman and Consumption Smoothing

For those keeping track, I’m happy to report that I’m writing this from safety in Argentina. I, together with some other foreign tourists,  got out of the literal tourist trap set by the Chilean protestors by walking 6 hours, refugee style, to the Argentina border. We successfully crossed two blockades before we reached the border. Never have I appreciated an international border this much.

For a brief coverage of the strike in southern Chile and its impact on tourists, please see this report from the BBC:

Tourists trapped in Chile due to fuel price strikes

I had a lot of thoughts during that journey. I will write about them later. Now, some more money related stories from my trip to Argentina and Chile.

Use a Middleman

In the US I’m conditioned to shy away from all middlemen and buy directly from the source. Here in Argentina I find I need to unlearn that habit.

Every hotel I stayed at offers value-added services such as selling bus tickets or booking tours. These tickets and tours aren’t any more expensive than what you pay if you go to the provider directly. Buying from a middleman is actually better than buying directly because the middleman offers better service. They are closer. They have longer hours. If you change your mind, you can get a refund more easily.

Everything is based on a voucher. You pay the middleman and they give you a voucher. You give the voucher to the actual provider. Presumably the provider will collect from the middleman later. Because the provider primarily distributes its services through agents and resellers, it doesn’t undercut them.

Consumption Smoothing

I met many tourists here. Some are young, in their college age. I’m jealous of them having more time than I do. Weather isn’t ideal? No problem, they just wait another day. There’s a strike? Just wait it out.

Instead of working for low wages back home, they are having a good time experiencing the world. Grab a Lonely Planet book, sleep in hostel dorms for $10 a night, travel from one place to another or from one country to another by bus — they are able to experience the countries much better than I do when the opportunity cost of their time is much less. I wish I were able to do that when I was their age.

Consumption smoothing means not waiting to consume until you have the money for it. It’s not necessarily living beyond one’s means. The overall consumption isn’t changed: just the timing is smoothed over one’s lifetime. The students I met are doing just that. If it results a higher student loan balance, it still beats having to spend much more years down the road and get much less out of it.

It seems to me Americans aren’t taking advantage of this as much as Europeans. I met people from Germany, the Netherlands, Denmark, Britain, and Israel, but not many from the U.S. Perhaps it’s because American college education is too expensive? For a small country, Israel is heavily represented among tourists here in Argentina. Some stores even have signs and flyers in Hebrew. The government pays as much as 80% of the cost of college education in Israel. Of course when you graduate and start working, you pay the government back in taxes. In a sense the Israeli government is helping the students smooth their consumption.