Argentine Economy

[QUOTE=Daddy Rulz]I hope this doesn't turn into a flame war between respondents.

With the slow disintegration of the Argentine economy of which the inflation is a part (whatever the correct rate) at what point does this begin to make itself manifest in the Dollar / Peso exchange? I understand that Argentina has or had a lot of foreign assets or bonds or money or whatever that they have been selling to maintain the 3-1 ratio. Further I understand that the dollar hasn't been doing that well worldwide over the last few years (with a recent bump up in the last month or so) but if the Argentine economy is doing worse than the EEUU economy it seems to me that at some point we should start getting more Pesos for Dollars.

Just wondering.[/QUOTE]The reality is that if the central bank had not been active in the market over the past few years, the peso would have appreciated against the dollar, similiar to the other South American currencies. Now that the inflation genie is out of the jar, my guess, based on my experiences over the past 18 years, is that the 3-1 exchange ratio will continue to hold and be supported by the central bank, and that for foreigners, the inflation will continue and the goods and services they consume, will become intolerably expensive. Some time in the medium future, my guess is more than a year and more probably longer, it will not be sustainable and the whole house of cards will collapse.

In 1990, a standard meal in El Palacio de la Papa Frita was under U$10. In 1998 it was U$40. In 2002 it was again under U$10 and now it is U$30 or there-a-bouts. The thing to remember is there is no other economy in the world that is so disfunctional and has the capacity, despite the mis-management, to continue along blithely, ignoring all fundamental macro economic principles, and manage to last for the time it does. My guess it is an indicator of the potential capacity of Argentina. All you have to do is to get past the obstacle of the sovereign risk to your capital.

Argento

Another example of biased reporting from Sid. [b]Of course[/b] the [u]longshoremen[/u] want to export more (of anything and everything) Beef to 100 pesos per what? Kilo? And for what cut? Anyone who reads the papers knows why their exports of beef are low: attempting to keep prices lower for Argentine beef-eaters. Now whether that is sound policy or not (the doctrine of comparative advantage suggests it is not) is another story but listening to longshoremen's views on export policy is rather like listening to a fox who is telling you security is too tight in your henhouse.

[QUOTE=Dickhead]listening to longshoremen's views on export policy is rather like listening to a fox who is telling you security is too tight in your henhouse.[/QUOTE]- Dead -

BM.

Sydney old sport,

Why is it you sound like John McCain going off on a rant when DH caveated his reply to you several times and never attacked you? Hmmmm? Try to stay in the dialogue instead of dropping the H bomb Sydney old sport, if you can.

Politics is inherently divisive, by its nature (since it's about taking money from some people and giving it others) I really think these political threads should just be deleted altogether, so folks can concentrate on what they have in common (in the case of this forum, we all know what that is) and not fight endlessly about which politician does a fairer job of stealing and destroying the economy.

Sidney,

I met you about a year ago. You reminded me of [blue][Deleted by Admin][/blue].

You are entirely too old to use the word "diss" in your vocabulary.

Thanks for trying.

GH

[size=-2][b][u]EDITOR'S NOTE[/u]:[/b] [blue]This report was edited in accordance with the Forum's Zero Tolerance policy regarding reports containing any [u]personal attacks or derogatory comments[/u] directed towards another Forum Member or the Forum Membership in general.[/blue][/size]

[QUOTE=Monger514]Politics is inherently divisive, by its nature (since it's about taking money from some people and giving it others) I really think these political threads should just be deleted altogether, so folks can concentrate on what they have in common (in the case of this forum, we all know what that is) and not fight endlessly about which politician does a fairer job of stealing and destroying the economy.[/QUOTE]Hi Monger514,

I've tried that, but it's not effective as political subjects will invariably crop up elsewhere in the forum. Providing a specific thread for political discussion allows people to vent their opinions outside of the regular discussion threads.

Thanks,

Jackson

Jackson,

Point taken! Reminds me of Craigslist's justification of having the erotic section, so posters don't pollute the other areas. It does work pretty well.

I just need to resist the occasional urge to peek in these (very active) political threads. (And really resist the urget to post!).

Keep up the good work.

M514

[QUOTE=Daddy Rulz]I hope this doesn't turn into a flame war between respondents.

With the slow disintegration of the Argentine economy of which the inflation is a part (whatever the correct rate) at what point does this begin to make itself manifest in the Dollar / Peso exchange? I understand that Argentina has or had a lot of foreign assets or bonds or money or whatever that they have been selling to maintain the 3-1 ratio. Further I understand that the dollar hasn't been doing that well worldwide over the last few years (with a recent bump up in the last month or so) but if the Argentine economy is doing worse than the EEUU economy it seems to me that at some point we should start getting more Pesos for Dollars.

Just wondering.[/QUOTE]The Dollar to Peso ratio may risk of getting lower, but not necessarily because of any disintegration or strengthening of the economy.

Unlike in 2001, most of the current debt is nominated in Pesos, so the government doesn't have that much need of buying Dollars to honor it.

Also, under a neutral scenario, it is expected that the federal government cancels all it obligations for 2009 and face some difficulties for canceling those for 2010. Again, that doesn't need an extreme effort for getting Dollars at least until 2010.

Finally, Argentina and Brazil just signed an agreement to start bilateral trade nominated in Pesos or Reals. Since almost 70% of Argentine manufactured goods are sold to Brazil, the weight of the Dollar declines as the currency of trade for Argentina.

Just some tips to watch.

Andres

Thanks, Andres. I've wondered myself about the question Daddy posed, and your answer is the most plausible I've come across. Too bad, though. I'd be able to buy more quality time with my GFE of choice if it went to 4.50 per USD, but then the chicas would probably raise their prices to compensate.

As always your help is appreciated.

Having the debt in peso is better then having it in dollars. But if the central bank had to print new peso, to pay off debt, the peso would still lose value. Also the fact that the government taped Central Bank foreign reserves to clear a $6.7 billion, six-year-old default on debts to Paris Club lender countries, mean that the central bank is not as independent as in other countries. In the future if the government forces the central bank to pay down some of its debt, that will weaken the peso.

According to the Financial Times of London, Argentina debt is higher now, then it was before the economic collapse. The government says it's running a surplus, if that is the case, why are they taking on new debt, and at very high interest rates?

On the other hand, the peso should get stronger; since Argentina is bring in more money then sending out, because of the high prices for agricultural products. (Prices are down, but still very high historically)


Why is the government taking on so much new debt???? The New debt makes me think, the government is lying more then the markets think they are. It just does not make sense to take on new debt at very high interest rates, when they say they have a big tax surplus?

It's hard to know what will happen to the peso in the short term to mid term. The trade balance should push it up. But the government dept, and lying about inflation, and maybe about their tax surplus, should push it down. Right now it looks like the two are balanced.

Argentine peso weakens due to dollar strength

BUENOS AIRES, Sept. 11 (Reuters) - Argentina's peso currency weakened by 0.63 percent on Thursday to 3.1450/3.1500 per dollar ARSB= in opening informal trade between foreign exchange houses, as measured by Reuters, due to the dollar's global surge against major currencies.

In formal trade between banks the peso slumped 0.40 percent to 3.0875/3.0900 ARS=RASL per dollar, its weakest since late May. (Reporting by Walter Bianchi; Writing by Fiona Ortiz; Editing by James Dalgleish)

I would not be too concerned about day to day fluctuations in the peso. It is inevitable that the peso will collapse and that Argentina will find itself in another economic crisis The question is when, not if.

Argentina has an econimic playbook which could have been written by the Three Stooges aka Los tres chiflados

[QUOTE=Sidney]What lies! Private economists say August was.5% to 3%! And 12 months at 25 to 30%![/QUOTE]The most trustworthy figures are 2.5% - that's three times the official number.

Anyone interested in loaning money to Argentina should liisten to me first. I can sell you the 1) Brooklyn Bridge 2) Yankee Stadium 3) the fountain of youth 4) the formula or changing lead into gold 4) You name it you got it for 10 cents on the dollar.

These might not be the best investments in the world but I can guarantee with 100% certainty that any money lent to Aregntina will never be repaid. Argentina has relied on the stupidity of lenders for more than half a century (think Paris Club) to fund their corrupt governments.

Sept. 23 (Bloomberg) -- Citigroup Inc. Barclays Plc and Deutsche Bank AG proposed a debt-restructuring plan to Argentina that may help the country raise cash as declining commodity exports curb tax revenue, a government official said.

The proposal aims to get bondholders who refused to participate in Argentina's 2005 debt renegotiation to swap their defaulted securities and to put up fresh cash to buy new debt, said the official, who asked not to be identified because he isn't authorized to speak for the administration.

'It's indicative that they are feeling a little less secure about their financing,'' said Edwin Gutierrez, who manages about $5.5 billion of emerging-market debt, including defaulted Argentine bonds, for Aberdeen Asset Management Plc in London. He declined to say whether he'd participate in a restructuring.

Argentina's defaulted bonds gained on speculation the government will make an offer to creditors soon. Defaulted dollar bonds climbed more than 1 cent on the dollar to about 29 cents after rising 1.5 cents yesterday, according to Exotix Ltd. A London-based brokerage that specializes in distressed securities. Creditors holding about a quarter of the $95 billion in defaulted debt rejected Argentina's 30 cents-on-the-dollar offer in 2005.

Whole article.

[url]http://www.bloomberg.com/apps/news?pid=20601086&sid=a9QrJOnYJ0F0&refer=news[/url]

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Looks like Argentina wants to tap world markets for money. They are choosing a very bad time, with the credit crunch in the US which will likely spread to Europe, unless the government can get some liquidity into the system.

[QUOTE=Sidney]1. Criticizing the USA economy (as if she had no problems in AR)

2. Defending the ''accuracy'' of INDEC.

3. Pleading for the ''return'' of the Malvinas.

4. Setting up conditions to borrow with new long term debt (where were the K dummies when credit was easy and cheap?

5. Seeking the extradition of Iranian terrorists.

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Meanwhile in AR, inflation remains unchecked, many strikes continue, the Farmers may strike again due to no K ag plan, the commuter trains are being burned, the embarrassing Suitcase Trial continues, there is no solution for insufficient power, mas![/QUOTE]I think that considerin the actual U. S. A. Economical situation, Sidney, I'd be a lot more worried about the financial apocalyspse on Wall Street than in our humble economy (here put a smiley icon).

But if you want to talk about it, I truly advise every Argentine who has money invested in any North American bank to draw it as quickly as he can, before the tsunami came.

[QUOTE=Julio]I think that considerin the actual U. S. A. Economical situation, Sidney, I'd be a lot more worried about the financial apocalyspse on Wall Street than in our humble economy (here put a smiley icon)[/QUOTE]No offense man, but watch indeed as we fix our fuckup. We are actually very concerned about it, but not to the point that I think many Argentinos would be within their own country if they had a similar problem being exposed.

The guys who work for me here are still very happy to be paid in dollars, and are still terrified to put their money (particularly in dollars) in an Argentine bank. They see something coming here that a lot of others on this board remark about and are thinking about the economic cycle of woes that Argentina has had because they are unable to fix their issues.

Wishing that the US will fail so you can feel better about your own country's situation is unbecoming.

[QUOTE=El Queso]Wishing that the US will fail so you can feel better about your own country's situation is unbecoming.[/QUOTE]No, I don't feel better, why should I be?

But is a funny thing that after reading the terrible predictions some AP members cast along the last months about my country, none of them still becoming real, after more than a year, and the unveiled desires of so many mongers for the collapse of our own economy, for no other selfish purpose than to get more pesos for dollars so they can fuck better Madaho's girls and buy better Recoleta appartments, not caring at all what the rest of the country may suffer, well, the tornado suddendly turned home, and looks like it only started.

Not get angry with me, El Queso, I'm using the same words I used to read in this same thread, only changing the direction of the flow. So I repeat this, to any argentino hanging out there: take your money out of the north american bank where you had invest it, and put it in any european bank. Or in a chinese bank, if you can. The rush soon will begun.

Thank you.

Spend all your money on hookers and fuck yourself to death as quickly as possible, regardless of your nationality and its current economic situation.

Julio,

I agree with many of your post especially those about Americans calling the pot black in reference to racism or even corruption in Argentina but I can't agree with your assessment of the Argentine economic policy.

The US is going through a very bad moment, much worse than many Americans realize but they will get over it (at least this time) and the fact that this problem hasn't seemed to affect Argentina just yet is due more to Mrs Crisis-tina's lies and wishful thinking than to reality.

I agree that it may be safer to place your money in European or even Asian banks at this very moment but faced by the option of leaving your money in American banks or converting it into pesos in Argentine banks take some advice from a fool - leave it in the US! Whatever affects the US economy is sooner or later going to affect the Argentine economy and three times worse.

I don't foresee a big devaluation of the peso which many mongers would love for the obvious reasons you mention in your post but I do see an important recession which will damage Argentina's fragile economy again as has happened umpteen times in our lifetime.

The unbreakable cycle of Argentine economy is that it gets bad and worse till it's about to burst and then it pulls out and starts to grow till it's about to get good - then before it is really good it worsens again and so on and so on!

Julio, don't give up on the racism in Argentina thread but don't let your stance there overflow to this thread. It's a different kettle of fish!

[QUOTE=Julio]But is a funny thing that after reading the terrible predictions some AP members cast along the last months about my country, none of them still becoming real, after more than a year, and the unveiled desires of so many mongers for the collapse of our own economy, for no other selfish purpose than to get more pesos for dollars so they can fuck better Madaho's girls and buy better Recoleta appartments, not caring at all what the rest of the country may suffer, well, the tornado suddendly turned home, and looks like it only started.[/QUOTE]Ditto. Many comments about the imperfect Argentine economic system, which are accurate, also apply to the US economy as well (crony capitalism, for instance)

[QUOTE=Julio]So I repeat this, to any argentino hanging out there: take your money out of the north american bank where you had invest it, and put it in any european bank. Or in a chinese bank, if you can. The rush soon will begun.[/QUOTE]I think that keeping the money in the US or elsewhere is secondary, at least in terms of loosing the deposits. What is really crucial is to realize that an old paradigm is dead (extremely unregulated financial operations) a new paradigm will emerge soon (more regulated markets, hard to get credits, etc) As such, the US financial markets won't provide very attractive opportunities besides a refuge on hard times (and that while the US Dollar stands as the International currency)

Andres

[QUOTE=Aqualung]The US is going through a very bad moment, much worse than many Americans realize but they will get over it (at least this time) and the fact that this problem hasn't seemed to affect Argentina just yet is due more to Mrs Crisis-tina's lies and wishful thinking than to reality.[/QUOTE]It's pretty evident that many mongers here deeply dislike CFK. What escapes from my understanding is why not to acknowledge the Kirchner's ability to build a sound strategy of diversifying exports.

I found out that currently only 7% of Argentine exports go to the US and 15% go to Brazil, which will be hardly hit by the US financial crisis. Argentina has at least 12 to 18 months before the indirect effects of this crisis hit the country. That's a very good hedging strategy, IMHO.

[QUOTE=Aqualung]Whatever affects the US economy is sooner or later going to affect the Argentine economy and three times worse.[/QUOTE]Why? What's the rationale that explains such effect?

[QUOTE=Aqualung]I don't foresee a big devaluation of the peso which many mongers would love for the obvious reasons you mention in your post but I do see an important recession which will damage Argentina's fragile economy again as has happened umpteen times in our lifetime.[/QUOTE]The difference now is that the power of the financial sector is ebbing. I don't foresee many financial crises as before, specially if the government closes most of the sensitive issues (Paris Club debt will be paid, defaulted bonds will be rolled over at a lower price but solved anyway, the INDEC will sooner or later be normalized) and keeps an iron fist on new debt and speculative investments.

Andres

[QUOTE=Julio]No, I don't feel better, why should I be?

But is a funny thing that after reading the terrible predictions some AP members cast along the last months about my country, none of them still becoming real, after more than a year, and the unveiled desires of so many mongers for the collapse of our own economy, for no other selfish purpose than to get more pesos for dollars so they can fuck better Madaho's girls and buy better Recoleta appartments, not caring at all what the rest of the country may suffer, well, the tornado suddendly turned home, and looks like it only started.[/QUOTE]First, I agree with you that some members on this board can be somewhat abusive in their expression of their opinions.

Most of them don't really want anything bad for Argentina (I truly don't thnk ANY of them do) but are mostly wishing that inflation wasn't so nearly out of control and that a place where they had hoped to stay and enjoy for some time has actually become more expensive in many ways than places to live in the States (I can live cheaper where I'm from than I can in Capital Federal, even in the outlying places like Pilar where I'm moving in a couple of weeks - hopefully)

What they see is that the Argentine economy can't keep up with the runaway inflation and other problems that exist and pretty much everyone expects it to fall back to a point that is more reasonable based on the actual economy. The fact that it will probably come in one fell swoop is because a lot of people (Argentinos as well) don't have much faith in the the government working anything out beyond how they are going to survive the fall when it comes.

The difference between Argentina and the States is that even after the Great Depression we managed to get back to where we were and make it BETTER because we work better together and with a better system than Argentina does. I'm not even saying it's the best in the world, but it is better than Argentina in terms of output and the comfort of its citizens - that is a fact that really can't be disputed unless there is something noble in having a large number of poor that can't live anywhere near the norms of the middle class and serve the upper and middle class.

[QUOTE=Julio]Not get angry with me, El Queso, I'm using the same words I used to read in this same thread, only changing the direction of the flow. So I repeat this, to any argentino hanging out there: take your money out of the north american bank where you had invest it, and put it in any european bank. Or in a chinese bank, if you can. The rush soon will begun.

Thank you.[/QUOTE]Well, I'm sorry Julio, but you haven't seen words of anger from me. I try to be calm and rational in my responses. I'm not perfect, I may miss sometimes.

Using the same words back at people really doesn't accomplish anything except creating anger between two or more people. And you place yourself at exactly their level, which gives you absolutely no moral high ground whatsoever, if that is important to you.

I don't want the Argentine economy to fail. I want it to lose its inflationary trend, for sure. But the truth is, I employ 5 programmers here and EVERY ONE OF THEM likes the fact that they are being paid in US dollars, and are looking for ways to get most of their money out of Argentina. They are absolutely convinced that the Argentine economy is going to fail and are happy not to be tied to a local company.

In fact, two of my programmers were in the process of trying to move to Europe and the UK at the time I offered them a job. They didn't want to be anywhere near here when the next fall happens.

But urging people to take their money out of the States at this point is not like urging people to take their money out of Argentina (or to not invest there to begin with) One has a good track record of providing good return on investment, the other has a track record of annuling debts and creating an environment non-conducive to investment.

[QUOTE=Aqualung]Julio, don't give up on the racism in Argentina thread but don't let your stance there overflow to this thread. It's a different kettle of fish![/QUOTE]Thanks, Aqualung, but I consider there are all in the same kitchen :)

[QUOTE=Andres]I think that keeping the money in the US or elsewhere is secondary, at least in terms of loosing the deposits. What is really crucial is to realize that an old paradigm is dead (extremely unregulated financial operations) a new paradigm will emerge soon (more regulated markets, hard to get credits, etc) [/QUOTE]It's the continuation of a corrupt system, in wich the profits become private and the losses "socialize".

But well, O. K. That's the history of capitalism.

When I advise to take the money out of any north american bank for those who have it, was because, due to this crisis, hundreds of small banks in U. S. A. Will break and the Big State will be unable to help ALL the banks (perhaps a few, the big ones, but definitely not the small ones), for the simple reason it has not the monumental amount of dollars needed to make such a rescue.

And I absolutely agree with you: this old paradigm is dead, wich brings us, back again, to old dear Karl Marx when he talked about the contradictions of capitalism and how it will annihilate himself.

After this, at least, it has been clearly, and dramatically exposed that the capital(ism) can't be left alone to take control of himself.

Sept. 29 (Bloomberg) -- Argentina's defaulted bonds gained after the government said Cabinet Chief Sergio Massa will speak tonight about an offer to restructure the $20 billion of debt that creditors held out of a 2005 settlement.

The bonds rose 1 cent to about 29 cents on the dollar, according to London-based Exotix Ltd. The securities have risen 3 cents in the past six days as President Cristina Fernandez de Kirchner said on Sept. 22 that she was considering a proposal to settle with creditors who rejected the government's offer three years ago of 30 cents on the dollar.

'We're seeing a lot of trading at the moment,'' said Amir Zada, an associate director in New York at Exotix, a brokerage that specializes in distressed securities.

Fernandez is seeking to settle with the so-called holdouts -- a move that signals a change in tack -- in an effort to regain access to international capital markets as slowing growth and declining commodity exports cut into tax revenue. Lawsuits from creditors including Kenneth Dart, a billionaire investor who sued Brazil during that country's 1994 restructuring, have prevented the government from issuing debt abroad.

Argentina is considering a restructuring offer that would require creditors to invest $25 in new bonds for every $100 of defaulted debt they swap, helping the South American country raise cash to meet its financing needs, according to a government official.

Payout Estimates.

Citigroup Inc. Barclays Plc and Deutsche Bank AG proposed the restructuring plan, according to the official, who asked not to be identified because he isn't authorized to speak for the administration. Peter Truell, a spokesman with Barclays, Ted Meyer, a spokesman with Deutsche Bank, and Danielle Romero- Apsilos, a spokeswoman with Citigroup, declined to comment. All three are based in New York.

[url]http://www.bloomberg.com/apps/news?pid=20601086&sid=akHEnBtKlUoY&refer=latin_america[/url]

[QUOTE=Sidney]AR may have diversified because the foreign markets would buy from any country that had foodstuffs. K could not have done much more to scare foreign countries from purchasing from AR with his anti-ag policies! K's policies are completely unsound! And I might add, so are his various statements and policies about investing in AR! AR's timing for debt restructuring couldn't have started at worse time! The world is in a terrible financial crisis! (Already, to secure credit, AR had to pay Chavez 15%! A logical explanation is that AR current finances are an absolute lie, as are INDEC's! If AR is able to rollover the Paris Club and the ''Holdouts, the rate interest will be very high! There is no way to project when or if the next crisis will come.[/QUOTE]I concur. And especially now that the buy-out deal put to Congress failed to get up.

And another thing. The schadenfreude obvious from the posts of our unrepentant Argentine duo obviously doesn't take into account the fact that Argentina will take the hit as well. Reduced prices for their commodities, no access to credit, an economy manipulated by economic nincompoops and the current drought's reduced production is going to impact very hard.

The schadenfreude is just the obvious indicator of their bias against the USA and the western economic system.

Time will tell though. My bet is that although there will be a tough, tough period ahead for the next year, the system is robust enough to take it and begin anew. And without the hubris and the bullshit of the past 10 years.

I wonder if Argentina's system will be able to do the same?

Argento

[QUOTE=Argento]I concur. And especially now that the buy-out deal put to Congress failed to get up.

Argento[/QUOTE]Congress will probably do something do restart working on something Thursday. They will not do anything tomorrow because of a Jewish holiday. I think something might pass, it's not dead yet. Allot of politics going on in this. Everyone wants to say they changed something to help or protect the American people.

The deal is not dead yet. Tomorrow is a Jewish holiday so no work on it tomorrow. Thursday they will start again. They might even be able to get some people to change their votes, and pass basically the same bill again. It's an election year, everyone trying to play politics and blame the other guy. Or they want to be able to say they added something to the bill, that made it allot better.

I think something will pass, but again anything can happen.