Argentine Economy

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Exon

How much longer before we hear a giant POP - or will it be a slow whistle like the air coming out of the balloon?

With the current news, how can the exchange rate be slow stable?

Is there any likelihood that a repeat of 2001 is possible?

Exon,

I read that article as well and I think that it speaks volumes about Ms. Kirchner. I don't know about you, but 50 mg of Viagra works better for me than a couple of pork chops!

[QUOTE=Iamzonzon]How much longer before we hear a giant POP - or will it be a slow whistle like the air coming out of the balloon?

With the current news, how can the exchange rate be slow stable?

Is there any likelihood that a repeat of 2001 is possible?[/QUOTE]I have been reading 'pop and whistle' predictions for the past 3 years and posting that the liklihood was slight. US nationals have to realize that the Arg peso is to all intensive purposes, a U$ currency and although it has inflated / devalued against the U$ by about 5% p.a. since 2002, the difference since the corralito is an exchange of 3 to 1 to a current 3.8 to 1. About the same rate the U$ has devalued against the Euro. The real issue of course is the internal inflation. More than 30% per annum which is why prices for consumer goods such as apartments, food, chicas, taxis etc impacts so directly on costs to a monger. Eventually it will collapse but I think it will not be this year or perhaps even in 2011. It is a remarkable system that defies logic. But it will collapse. The question is always, 'when?'

Argento

[QUOTE=Iamzonzon]How much longer before we hear a giant POP - or will it be a slow whistle like the air coming out of the balloon?

With the current news, how can the exchange rate be slow stable?

Is there any likelihood that a repeat of 2001 is possible?[/QUOTE]Although some of us might be licking our chops in anticipation of the fall of this government and the Argentine economy, I believe, like Argento, the fall will not occur before 2012. I believe the script is already written on how Cristina will not only survive, but also assure the election in 2011 of her husband.

The Executive branch of the government has effectively and in a Machiavellian manner taken over the Central Bank. Not only does it have the keys to the bank, it now has its own man, Pesce, as the Director of The Central Bank. Pesce is a long time supporter of Kirchner and has already stated the money in the Central Bank should be used not only to pay down debt, but also be spent on national programs.

Congress in the end will give approval to spend the reserves because the governors and mayors of the big cities are already pressuring the national government to use the money to cover some of the expenses (deficits) of the provinces. Also, big cities like Capital Federal, Mendoza, Cordoba, etc. Would like to get there financial dog and pony shows on the road to raise anywhere from 400 to 100 million dollars (Macri needs to borrow 400 million dollars and other cities need less for their city projects) They can't go to the United States and other countries and make their presentations until the crisis of how the Central Bank reserves can be used to pay the international debt. These governors and mayors will pressure their supporters in congress to settle quickly the spending of the Central Bank reserves.

Cristina will not only take the 6.7 billion over the next few weeks to pay the international debt, but she will take an additional 13.3 billion to pay the rest of the debt sometime in September of this year. Also, as part of her survival strategy and to keep her supporters (voters) on her side she will probably take 5 billion dollars to continue her excessive spending.

We will probably see, as already predicted by the Minister of the Economy, a devaluing of the peso over the next six weeks. The exchange rate will probably settle at an exchange rate of AR$4.05 to US$1. In March and April the peso will be supported by the influx of dollars from the harvesting and sale of the agricultural produce.

After all of these shenanigans the Central Bank at the end of the year will be left with about 23 billion dollars. Of course it could be a lot less if, the 17 billion dollars in CDs the Central Bank holds haven't been pulled and sent outside the country or stashed under the mattress.

Also, during this year, Cristina might get back to the plan of buying YPF, and of course there's always Telecom to nationalize. Also, typical of Peronistas, they'll start pursuing other international companies like IBM and hit them up for unpaid taxes via AFIP. If they can squeeze 100 to 200 million from each international company in the end it will add up to some real money to continue her spending.

During this year the National Government will try to neuter the Supreme Court. It's already mercilessly attacking the Supreme Court. These attacks will continue and by the end of the year the National Government will probably have complete control.

In 2011 we will see the National Government take or get approval to take an additional 10 billion dollars for national programs. This money will be spent on programs in an attempt to assure the election of her husband. If this were to occur, this will leave about 7 billion dollars in the Central Bank to defend the peso.

Also, I believe, Cristina has a plan to capture a larger voting block in the city of Buenos Aires (they usually lose the city to the opposition) How will they try to win the city of BA?

Argentina is the only Mercosur country that has opened its doors fully to citizens of Mercosur countries. Over the past 4 years, Argentina has aggressively and efficiently processed and given residency to about 1 million citizens from various Mercosur countries. Probably half of these immigrants are voting adults. I believe, given the whispers out there, the National Government will at the beginning of 2011 offer citizenship to these people.

Over the past 3 months I've been asking myself why has the National Government restructured and streamlined the two agencies that deal with immigration, the Department of Immigration and the Registry of Persons. As I've mentioned before, I've never seen such a yeomen effort in making these two agencies work smoothly and process people rapidly such that they will have their residency and DNI in record time. The only answer I have is; the National Government will offer citizenship to them and since most of them reside in Buenos Aires they will end up voting for he Government that has given them not only citizenship but also survival monies and food (there are numerous benefits that immigrants receive with only temporary residency. They receive a lot more with residency and the DNI) It's a cynical observation, but this government will do whatever to win.

[QUOTE=Facundo]Also, I believe, Cristina has a plan to capture a larger voting block in the city of Buenos Aires (they usually lose the city to the opposition) How will they try to win the city of BA?

Argentina is the only Mercosur country that has opened its doors fully to citizens of Mercosur countries. Over the past 4 years, Argentina has aggressively and efficiently processed and given residency to about 1 million citizens from various Mercosur countries. Probably half of these immigrants are voting adults. I believe, given the whispers out there, the National Government will at the beginning of 2011 offer citizenship to these people.

Over the past 3 months I've been asking myself why has the National Government restructured and streamlined the two agencies that deal with immigration, the Department of Immigration and the Registry of Persons. As I've mentioned before, I've never seen such a yeomen effort in making these two agencies work smoothly and process people rapidly such that they will have their residency and DNI in record time. The only answer I have is; the National Government will offer citizenship to them and since most of them reside in Buenos Aires they will end up voting for he Government that has given them not only citizenship but also survival monies and food (there are numerous benefits that immigrants receive with only temporary residency. They receive a lot more with residency and the DNI) It's a cynical observation, but this government will do whatever to win.[/QUOTE]This isn't a new concept, and in fact it is essentially the same strategy the Democrats will employ via "Immigration Reform" to win the 2012 elections in the USA.

Thanks,

Jackson

You paint a very similar picture of what Obama is trying to do. Robbing Peter to pay Paul, neutralize the judiciary, entrench incumbents and create new partisan voters.

I must add that the hairs on the back of my neck stood up when you mentioned attacking and neutering the Supreme Court. That is exactly what Obama is doing. His lies and misrepresentations about the supreme court featured in his state of the union address were part of an orchestrated attack on the judiciary by leftists (with Obama at the helm).

[QUOTE=bloomberg]Argentina May Seek Changes to Central Bank Charter, Nacion Says.

Share Business ExchangeTwitterFacebook| Email | Print | A A A By Bill Faries.

Feb. 1 (Bloomberg) -- Argentine President Cristina Fernandez de Kirchner may seek changes to the central bank's charter to allow the government to tap the institution's reserves, La Nacion said.

Fernandez and her husband, lawmaker Nestor Kirchner, want to be able to use the reserves to help create jobs or finance infrastructure projects, the Buenos Aires-based newspaper said, without saying where it obtained the information.

The proposal, which may be sent to congress next month, was discussed in a meeting with lawmakers at the presidential residence yesterday, La Nacion said.

To contact the reporter on this story: Bill Faries in Buenos Aires at [email]wfaries@bloomberg. Net[/email]

Last Updated: February 1, 2010 06:36 EST [/QUOTE]If they can take the central banks reserves, CFK should not run out of money for a few more years. Although when the reserves get low enough, the peso can get hit. Of course she can always lie, as they do about inflation, and say they have more then they do. Not sure if there are any checks and balances to prevent that. I notice they can say whatever they want about inflation. They fired a bunch of people who calculate inflation, and all of a sudden, inflation was down. Maybe they can do the same with the central bank? Don’t know.

[QUOTE=Tessan]If they can take the central banks reserves, CFK should not run out of money for a few more years. Although when the reserves get low enough, the peso can get hit. Of course she can always lie, as they do about inflation, and say they have more then they do. Not sure if there are any checks and balances to prevent that. I notice they can say whatever they want about inflation. They fired a bunch of people who calculate inflation, and all of a sudden, inflation was down. Maybe they can do the same with the central bank? Don't know.[/QUOTE]However, the global market has an idea of exactly what reserves, resources and income the country currently has and will calculate what 'subsidies' appear out of thin air (reserves) and will therefore mark down the reserves. As reserves dwindle, risk increases. Therefore, interest rates across the board will rise in order to compensate lenders for risk and the cost of capital will rise therefore constraining economic activity and fostering a cyclical tailspin that will auger into the earth.

Foreign exchange valuation differentials are driven largely (but not entirely) by interest rate differentials.

The 103 room 4 star hotel purchased with the legally questionable US$ 2 million by the Kirchners in Alto Calafate, is, without any marketing effort, 30% (30 rooms) filled by AerolÃ*neas flight attendants and pilots every night of the year at a cost of AR$ 519 per night. There are other hotels in the area whose nightly lodging is 20 to 50% less. AerolÃ*neas is the airline nationalized by the Kircheners about a year ago.

Since coming into power the wealth of these two corrupt politicians has gone from about a million dollars to about 22 million dollars (I suspect this is the tip of the financial iceberg that is known) According to them their wealth is due to savvy investing.

The full story can be read in today's edition of La Nación:

[url]http://www.lanacion.com.ar/nota.asp?nota_id=1229248&pid=8244249&toi=6479[/url]