By Eliana Raszewski, Luc Cohen and Marcelo Rochabrun
BUENOS AIRES/SAO PAULO, Sept 24 (Reuters) - Uber's fastest-growing market in the world is now Argentina, company executives say, attributing the expansion to the nation's sudden economic unraveling, which has boosted unemployment and sliced the purchasing power of Argentines.
Twenty percent of its drivers in Buenos Aires, the only city where it operates in Argentina, were jobless immediately before joining Uber.
The economic downturn, "has certainly helped many people find us as an alternative source of income," Felipe Fernandez Aramburu, who runs Uber business development in Argentina, told Reuters in a recent interview.
Despite worries about the country's economy, which shrank 4.2 percent in the second quarter after its central bank hiked rates to ward off a currency crisis, the company says it does not fear that a recession could boost the number of drivers without an equivalent increase in demand.
"Our growth today is less about economic conditions on the rider side," said Andrew Macdonald, who runs Uber in Latin America. Instead, Macdonald expects what he described as a paucity of public transportation options to lift demand in Argentina and said growth was highest in the neighborhoods with the least bus and train service.
But Uber's Argentine unit still faces a snag: For most rides, the company does not charge its drivers the 25 percent commission it is theoretically owed. Due to legal and regulatory hurdles, Uber rides in Argentina can only be paid with cash or credit cards issued abroad, which almost no locals have.
When rides are paid in cash, drivers currently have no way to pay Uber its 25 percent commission, leaving many with a growing debt to the company. Commissions from drivers are Uber's only source of revenue.
Uber's Argentine conundrum of being unable to profit from its fast growth there mirrors a wider problem for the ride hailing service, which has struggled to prove that it can be profitable as it gears up for a planned 2019 initial public offering.
'TOO MANY DRIVERS'
Macdonald played down those concerns, however.
"It's not about whether we are making money in the near term," he said, adding that the company will "eventually" have to charge those commissions.
Macdonald would not say whether the Argentine market is profitable. Uber has disclosed that its operations in nearby Brazil - now the company's second-biggest market worldwide - are profitable.
Once Uber can accept local credit and debit cards, it will be able to recoup what it is owed, the company said.