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.