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Guys,
What about the individual depts of the avarage american public, financed by creditcards. Is there a new Zunami on the way? Less jobs means less income, means less payback to their creditcard companies.
Dax lost allready 30 % in a few days, Rep. of Island is allready broke, Ukraine is following, Russia itself is getting down by the decrease of oil- and gasprices.
I need a drink!
C.
The government is sticking with its decision to analyze a proposal from holdout bondholders, and is also proceeding with plans to pay off its $6.4 billion debts with the Paris Club group of 19 creditor nations, the people said Friday.
Economists have questioned the plan to use central bank reserves to pay down the Paris Club debt. Those reserves, albeit relatively abundant, are now being seriously tested by the central bank's commitment to defend the peso exchange rate. On Friday, the government spent $500 million to prevent the peso from weakening.
Whole article.
[url]http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=b519b9b9-0b6a-4e1c-97c7-0749df4d864a[/url]
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If the central bank has to keep defending the peso, it reserves will slowly get used up. The Central bank had built up 50 billion dollars in reserves before the farmers strike months ago. I am sure it's less now. Also paying off the 6.4 Billion to the Paris Club will lower it more. When the Vultures feel the reserves are low enough, they will start shorting the peso.
[QUOTE=Sidney]1. AR scoffs at paying the $350 million Credit Swiss appraisal of Aerolineas. Meanwhile it bleeds cash from a losing operation! 2. It is impossible to expand the subways because long term financing is not possible! 3. AR has no Plan for the impending recession. 4. All AR commodities have fallen about 50%! 5. Because of the huge decline in the Real, AR has lost all manufacturing advantages. 6. AR is using huge reserves to prevent a further decline in the Peso. Exporters want 3.35+ and pressuing K! 7. AR bonds and stocks have crashed. 8. INDEC lies again! September inflation only.5%! 9. AR auto industry collapsing! 10. Refinancing the Paris Club and Debtors is impossible! 11. AR is considering import restriction against Brazil.12. Moyano says this is not a good time for wage increases! 13. AR is considering tax breaks for money repatriation! 14. Nothing is being done to formulate an Ag plan! 15. With current prices, farming may not be profitable! 16. AR is not ''diconnected'' to the world! 16. The Far East demand has collapsed! 17. Stagflation is very possible in AR's future! 18. IPS accuses K of government pressure on the news media! 19. Real estate transaction are down 23% from this time last year! 20. Foreingers don't want to invest in AR because AR will not invest in itself! 21. The gains L. A. Enjoyed from higher commodities prices will haunt L. A. Since prices have collapsed.[/QUOTE]So, Sid, you seem like you follow this stuff pretty carefully and seem pretty sharp. Your commodities call was right on the money.
No sarcasm whatsoever intended but: What happens next?
- Does the Argentine currency ultimately collapse? If so, any thoughts on when?
- Does the Kirchner regime remain in power? Cristina isn't all that popular now. What happens if the economic turmoil is ratcheted up 300%? Then again, she's got some powerful union backing, and I don't know whether there are any credible opposition candidates. Perhaps a few farmers.
- If the government ultimately collapses, which way does Argentina swing next? The Kirchners are left-leaning, so a repudiation of their policies might suggest a rightward turn. But, you know that if Chavez got caught sending $700,000 in a briefcase, then that many more millions already made it through undetected. He's got oil money and propaganda, and he'd love to bring Argentina closer to his sphere of influence, even if he does have economic troubles of his own. Which way does this play?
Peso for your thoughts.
I know this question is directed to Sidney. However, here are my 2 centavos. An economic crisis is the least of Argentinas worries.
I have said forever that there will be blood in the streets.
The reason there will be blood in the streets is because Argentina has an economic model that has not worked, is not working and will never work.
In the past the military has stepped in to restore order when the economy is in the toilet. The military no longer exists. There is no institution in place to restore order when the economy collapses and the misery index hits the ceiling.
Why in the economy of Argentina fucked? The economy of Argentina is fucked because Argentina has never crasped the concept that you cannot increase wages without increasing productivity.
Why are increases in productivity impossible in Argentina?
1) Argentina has the most counterproductive labor laws in the world. I have heard people say that the labor laws in Argentina sound similar to the labor laws in Europe. Complete bullshit. Talk to any Argentine who has worked in Europe and they will tell you the labor laws in Europe are not similar to the labor laws in Argentina. The labor laws in Argentina are designed to saddle bussinesses with unmotivated, dishonest workers who often spend every waking moment trying to sabatage the business they are working for.
2) Argentina has the most corrupt, worthless syndicatos (fucking unions) in the world. Macri (mayor of Buenos Aires) has said that the union are completely corupt and don't represent a single worker in Argentina. These worthless sons of bitches are adding unnecesary expenses to every business in Argentina.
3) The government of Argentina protects incompetent Argentina businesses by taxing foreign imports. This not only adds to inflation but allows Argentina businesses to forego investing in their factories. If the Argentine businesses were forced to compete in the world economy the Argentine business owners would modernize their factories rather than hiding their money overseas.
Or maybe not. With the fucking labor laws and the fucking unions maybe the business owners realize that it is a waste of time trying to compete in the world economy.
With the collapse of commodity prices, which are not going to recover for a long time, the tax base of Argentina has shrunk to unmanageable levels.
Mark my words, there will be blood in the streets. Furthermore, the underlying problem with the Argentine economy will never be resolved as long as the present labor laws remain, the fucking unions are allowed to throw a monkey wrench into every Argentine business, and the Argentine factory owners are allowed to forego modernizing their factories and are not forced to compete in the world economy.
[url]http://www.independent.org/newsroom/article.asp?id=2094[/url]
Wednesday, October 15, 2008
Argentina industry fears depreciation of Brazilian currency.
Argentina's powerful industrial lobby, warned that the current real exchange rate with Brazil is back to "2001 levels", when the preambles of the worst economic crisis suffered by the country in a century.
The Argentine Industrial Union message was made public on Tuesday when the Argentine peso rebounded against the US dollar closing trading at 3.23 pesos.
"The recent depreciation of the Brazilian Real of almost 40% has left the real exchange rate with Brazil at the deteriorated level of 2001" said UIA in a release. Brazil is Argentina's main trade partner.
The strong lobby called on Argentine authorities to recall the impact that the 60% devaluation of the Brazilian Real had on Argentina ten years ago in terms of exports, production and employment".
The president of UIA Juan Carlos Lascuarin from the metal industry and a close ally of the Kirchners warned that "if the situation continues, economic evolution will repeat the reiterated problems which have been experienced by the country".
Whole article.
[url]http://www.mercopress.com/vernoticia.do?id=14868&formato=HTML[/url]
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Sid might be right on the peso, AR may have to let the peso weaken, or their sales to Brazil will go way down, while Brazilian sales to AR should go up. The K's might try some protectionism, but that will just harm everyone.
If Brazil Real recovers, then they’ll be less pressure on the peso, but not sure that will happen. Brazil has large reserves to defend their currency, but I'm not sure how much they want to spend down their reserves to defend the Real.
Those of you who live in AR and have saving in peso, should think of changing them to some other currency, like Euro, or yen or dollars. If AR devalues as much as Brazil, you’ll take a 40% lose on your savings. The Yen has been going up, because of the unwind of the carry trade, but dollars are probably the easiest to buy in Argentina.
Great comments from Sidney and everyone else. I don't pretend to have much insight into these things, but I will admit that I'm interested to see how things develop.
For anyone interested, here's another WSJ article that sort of supports what Sid and others have been saying, at least in a round about sort of way. The gist: More loans for Latin America are on the way, but probably not Argentina because they're lying about their inflation data:
"International Groups Offer Latin America More Loans.
Looking to shore up the finances of Latin American nations affected by the global financial crisis, the Inter-American Development Bank said it will offer a new $6 billion credit line to member governments, as well as increase its more traditional lending for specific projects.
The move came as international financial institutions across the world, including the World Bank and the International Monetary Fund, are gearing up to help member nations.
The IADB's announcement was unusually specific about the amount of money it is making available. It also said it is joining forces with other multilateral organizations in an effort to marshal more resources.
Also on Monday, the Andean Development Corp. Which makes loans to Andean-region countries, announced a new contingency liquidity credit line for $1.5 billion. For its part, the World Bank said it could double the $5 billion in annual lending it usually makes to Latin American countries.
The two Latin American organizations generally lend to governments, which in this case will make money available to commercial banks that are having trouble getting credit. Ultimately, the money would be loaned to domestic firms. World Bank loans are made to governments and are generally used for government projects and policy reforms.
Additionally, the Latin American Reserve Fund, which makes loans to central banks in the region, said it would make available up to $4.5 billion in contingency lines.
"We want to preserve the kind of growth that Latin America has had recently," said IADB President Luis Alberto Moreno. "In 25 years, we have had 31 financial crises in Latin America. One of the lessons is you don't become ideological" and you must react strongly to potential problems, he said. "Countries that did that were successful in preventing crises from going any further," he added.
The IADB funds would be available to some countries that have had poor relations with the IMF, including Ecuador. But Argentina might not be acceptable, said an IADB official, because of questions about whether Buenos Aires is rigging its economic statistics to make its economy look better."
I'm not sure this link will work, but it was published in the WSJ yesterday (10/14) Here's the link just in case: [url]http://online.wsj.com/article/SB122394411680031119.html[/url]
Argentina promises to protect industry; Brazil dissents.
President Cristina Fernández de Kirchner announced that the defence of the economy and employment will be the priority of her administration, in order to cope with the international financial crisis that is affecting world markets.
"In a world where paradigms are falling, we are going to defend the Argentines' economic activity, employment and investment" the President said on Tuesday in Río Negro.
"The time for the real economy is coming; that sort of merciless financial capitalism we already had it until it blew up in 2001. What really lasts and what is worth, is the real economy. I'm talking about production and work" she added.
The President's statements came after National Industry Secretary Fernando Fraguío said on Monday that the government was analysing a series of measures to protect local industries from foreign competition.
Speaking at a seminar organised by the Argentine Industrial Union, Fraguío said, "We've prepared a series of unilateral measures, working in collaboration with the Customs Service, to control the amount of foreign goods that is being imported into the country. We're going to work within the framework of Mercosur, with our partners, and the idea is that we use all the instruments at our disposal to protect our industry, our markets and the jobs of Argentines."
He went on to say that, "We have a series of products, like textiles, shoes and toys, subject to non-automatic licenses and this means that there has to be supervision of their price and volume and with the way things are going at the moment, we may decide to include more products in the license system.
The local market isn't only represented and strengthened by purchases made by the state, provinces and municipalities but also by the decisions that each and every one of us takes every day. Our industries have to have Argentine suppliers and the shelves in the supermarkets have to be filled with Argentine products."
Speaking at the same event Juan Carlos Lascurain, the president of the Argentine Industrial Union (UIA) said that the dollar would need to rise against the peso to keep local production competitive.
He stated that "the most important thing is to have the dollar at a level which would allow Argentina to achieve a significant trade surplus, of the order of 12 billion dollars, which is what it would need to meet all its external commitments in the coming year. The dollar has to be higher than it is today. However, we can't allow that to distract us from the fact that there are other factors which influence the competitiveness of the industrial sector and which need to be analysed too'.
Trade union leaders have also expressed their support for the idea of more protection for local industry. Héctor Daher, press secretary of CGT trade union federation said in a statement that "this is the moment in which the internal market must be strengthened and the current level of employment and purchasing power of workers and pensioners protected."
The enthusiasm for protecting local industry was not shared by all who expressed a view. Guido Mantenga, the Finance minister of Brazil, a key trading partner for Argentina, denied that any consideration was being given to an increase in Mercosur common external tariff.
"We shouldn't be taking any sort of projectionist measures of any kind. We have to remain open and continue with our globalized activities, which benefit everyone,' he said. He also warned that it was "protectionism which was responsible for the 1929 crisis, when nations simply closed themselves off."
With regard to the effects of the international financial crisis on Brazil the minister recognised that "it's obvious that it is having consequences for us with liquidity and various other problems but what is important is that we have the means to deal with them and get back on the road to sustainable growth". (BAH)
[url]http://www.mercopress.com/vernoticia.do?id=14874&formato=HTML[/url]
RIO DE JANEIRO, Oct. 13 (Xinhua) -- The Brazilian Real's devaluation will continue and its exchange rate will probably not return to the point before the global financial crisis, Finance Minister Guido Mantega said Monday.
Brazil's inflation rate may undergo "some momentary pressure" due to the devaluation, Mantega said.
[url]http://news.xinhuanet.com/english/2008-10/14/content_10191429.htm[/url]
Thanks for taking the time to share your knowledge EOM.
[QUOTE=El Alamo]I know this question is directed to Sidney. However, here are my 2 centavos. An economic crisis is the least of Argentinas worries.
I have said forever that there will be blood in the streets.
The reason there will be blood in the streets is because Argentina has an economic model that has not worked, is not working and will never work.
In the past the military has stepped in to restore order when the economy is in the toilet. The military no longer exists. There is no institution in place to restore order when the economy collapses and the misery index hits the ceiling.
Why in the economy of Argentina fucked? The economy of Argentina is fucked because Argentina has never crasped the concept that you cannot increase wages without increasing productivity.
Why are increases in productivity impossible in Argentina?
1) Argentina has the most counterproductive labor laws in the world. I have heard people say that the labor laws in Argentina sound similar to the labor laws in Europe. Complete bullshit. Talk to any Argentine who has worked in Europe and they will tell you the labor laws in Europe are not similar to the labor laws in Argentina. The labor laws in Argentina are designed to saddle bussinesses with unmotivated, dishonest workers who often spend every waking moment trying to sabatage the business they are working for.
2) Argentina has the most corrupt, worthless syndicatos (fucking unions) in the world. Macri (mayor of Buenos Aires) has said that the union are completely corupt and don't represent a single worker in Argentina. These worthless sons of bitches are adding unnecesary expenses to every business in Argentina.
3) The government of Argentina protects incompetent Argentina businesses by taxing foreign imports. This not only adds to inflation but allows Argentina businesses to forego investing in their factories. If the Argentine businesses were forced to compete in the world economy the Argentine business owners would modernize their factories rather than hiding their money overseas.
Or maybe not. With the fucking labor laws and the fucking unions maybe the business owners realize that it is a waste of time trying to compete in the world economy.
With the collapse of commodity prices, which are not going to recover for a long time, the tax base of Argentina has shrunk to unmanageable levels.
Mark my words, there will be blood in the streets. Furthermore, the underlying problem with the Argentine economy will never be resolved as long as the present labor laws remain, the fucking unions are allowed to throw a monkey wrench into every Argentine business, and the Argentine factory owners are allowed to forego modernizing their factories and are not forced to compete in the world economy.[/QUOTE]