Argentine Economy

[Redondo]

The peso has been in a downward trend since 2001 and no end in sight. I think it's not worthwhile to talk about a stronger Peso.

I would think that somewhere in the next 2 years the amount of foreigners that visit Argentina will go down even though the number of Brazilians will continue to increase.

The most foreigners are spending a lot and helping to maintain the consumer spending-boom (buying electronics, clothes, etc) Things are still pretty cheap in Argentina

[El Greco]

Here is another story with a slightly different perspective:

http://www.ft.com/cms/s/0/10c30666-8...0779fd2ac.html

Questions, if the peso is allowed to "appreciate" what are the implications for foreigners visiting or living in Argentina? What will happen to real estate prices?

Suerte

I am not an expert in economics but my guess is that what happened in Brasil will be repeated here. That is less visitors. Many europeans are rediscovering Thailand and they are turning their backs to Brasil. It is way much cheaper and safer there.

With regard to real estate, although prices are in $USD, if they eventually are getting less pesos then they will ask for more dollars.

In Brasil prices are in Reais. Prices have gone up and the reais is much stronger so very few foreigners are buying.

Actually both foreigners and locals are trying to get rid of their properties especially the "flats". The ones that are part of an apart hotel but privately owned. The monthly condominium fees of 500-600 reais make them expensive to maintain.

El Greco

[Facundo]

Here is the link to WSJ.

http://online.wsj.com/article/SB1193...hpp_us_pageone

Great story.

Here is another story with a slightly different perspective:

http://www.ft.com/cms/s/0/10c30666-8...0779fd2ac.html

Questions, if the peso is allowed to "appreciate" what are the implications for foreigners visiting or living in Argentina? What will happen to real estate prices?

Suerte

[El Perro]

From Bloomberg:

Argentine Bonds Devastated by Rigged Data Suspicion, Fernandez.

By Lester Pimentel.

Oct. 26 (Bloomberg) -- The widespread suspicion that the government of President Nestor Kirchner has manipulated inflation data and the likelihood that his wife Cristina Fernandez de Kirchner will succeed him are transforming the Argentine bond market into a financial bloodbath.

Argentina's benchmark inflation-linked bonds have tumbled 24 percent this year, making the country's debt market the worst performer in the world, according to data compiled by JPMorgan Chase & Co. And Bloomberg.

Polls show that Fernandez is the front-runner to replace Kirchner in next week's elections. She rebuts claims by government statisticians that Kirchner's administration forced them to tamper with consumer price data to hide the extent of inflation. Merrill Lynch & Co. The world's biggest brokerage, estimates prices may be rising at a 17 percent annual pace, double the official rate.

'Argentine inflation-linked debt is the single worst long- term asset in all of emerging-markets,'' said Paul McNamara, who manages more than $1 billion of fixed-income at London-based Augustus Asset Managers. He sold his holdings of the securities when government workers said in February that they were told to eliminate prices from the index.

About 40 percent of the nation's $136 billion debt is inflation-based securities, whose principal rises and falls with the consumer price index. Bondholders have lost out on $250 million in interest payments this year, Merrill Lynch estimates. By reducing the official rate, the government will save $5 billion in principal payments at maturity, data from the New York-based firm show.

Investor Distrust.

The complaints of tampering by the biggest union representing employees at the National Statistics Institute, known as INDEC, are creating more investor distrust of a country that forced creditors to take a 70 percent loss when it restructured $95 billion of defaulted debt in 2005.

Daniel Fazio, head of the employee union, said in February that a Kirchner political appointee had statisticians eliminate some details from the index and violate secrecy laws that prohibit the release of information during the data-gathering process. The union said federal prosecutor Carlos Stornelli is investigating the allegations. The prosecutor's office has declined to comment.

Yields on the 5.83 percent peso bonds due in 2033, the most traded of the government's inflation-linked debt, have surged almost 2.5 percentage points since February to 8 percent, according to Banco Mariva.

Argentine dollar securities yield 3.79 percentage points more than U. S. Treasuries of similar maturity, almost double the average 2.02 percentage-point gap on emerging-market debt, according to New York-based JPMorgan.

'Perfect' Data.

Kirchner, 57, defends the data. He blamed international investors in a July 26 speech in Buenos Aires for casting doubt on the figures in an attempt to 'get higher profits.'' He called the consumer price index 'perfect'' on Oct. 5, and said opposition parties are trying to erode the government's credibility ahead of the elections.

Three days later, Fernandez, 54, told Buenos Aires business leaders that inflation 'is in no terms'' being manipulated and that bondholders were trying to pressure the government into reporting a higher rate.

'She has not made any direct statements that would lead you to the conclusion that she will do things differently from Nestor,'' said David Bessey, who oversees more than $7 billion of emerging-market debt, including Argentine bonds, at Prudential Financial Inc. In Newark, New Jersey.

Lost Credibility.

Fernandez, a two-term senator, leads presidential candidates with 43 percent of voters saying they support her, according to polling company Ricardo Rouvier & Asociados. Her closest competitor in the Oct. 28 election, former congresswoman Elisa Carrio, is 26 percentage points behind. Rouvier surveyed 1,200 people from Oct. 12-18 for the poll, which has a margin of error of 2.8 percentage points.

Fernandez said last month she will modernize the consumer price index, swapping outdated products for newer ones. That won't be enough to restore confidence, said Tomasz Stadnik, who manages $3.1 billion of emerging-markets debt at London-based ABN Amro Asset Management Services.

'The problem is the credibility of the change,'' Stadnik said. 'INDEC has lost its credibility.''

Inflation is about double the official 8.6 percent rate, the result of a 35 percent jump in government spending this year, according to New York-based Goldman Sachs Group Inc. The rate may climb to 25 percent by year-end, Merrill Lynch says.

Rate Gap.

Investors point to a breakdown in the relationship between price rises in Buenos Aires, the province that the government uses to gauge nationwide consumer prices, and Mendoza province as evidence that Kirchner's numbers are too low.

In the 10 years through 2006, annual inflation in Mendoza, a wine-producing region located in the foothills of the Andes, was on average 0.4 percentage point higher than in Buenos Aires, government data suggest. That gap swelled to 9.2 percentage points in the first seven months of 2007.

Polls show most Argentines say consumer price increases are accelerating, a concern for people who lived through inflation of as high as 20,000 percent in the 1990s. Kirchner pressed grocers this month into cutting some prices by 5 percent through December.

To contact the reporter on this story: Lester Pimentel in New York at lpimentel1@bloomberg. Net

Last Updated: October 26, 2007 00:01 EDT

[Thomaso276]

Here is the link to WSJ.

http://online.wsj.com/article/SB1193...hpp_us_pageone

Great story.

[Rockin Bob]

Interesting article in the Wall Street Journal today:

Economic Reckoning Looms.

In Argentina's Election

[Redondo]

August trade surplus down 58% due to surging exports.

I said it earlier but it seems now that Argentina starts to suffer from surging imports that can't be off-set by growing exports. The main reason for the surge in imports are the increase in fuel imports. I don't know if Argentina is already an fuel importing country but soon they will be, with leads to a more uneven trade balance.

The August fiscal surplus (before debt service) was about 850 million dollars. With a debt service of around 9 billion dollar next year the fiscal surplus will barely be enough to pay off debts.

The budget which was send to congress (Why? Was probally a lot more positive then the reality.

P. S. The Argentine state also recieved a lot of cash from about 1 million people switching from a AFJP pension fund to a state fund, but that won't be there next season.

[El Perro]

Or did you just run out of arguments?

It appears that you don't get it. Mongers aren't interested in arguing with you because you are a lightweight. When they do "argue" with you, it's like beating a one legged, blind schoolgirl in a footrace. But, hey, keep on trying! It's amusing to watch you fall down and not know where you are.

[Redondo]

This is especially posted for Rodondo.

Devaluation benefits exporters and therefore farmers. They sell in U$ and rather than losing 30% of their income, at a 4:1 exchange rate, they gain an increased ARG$ income of 20%.

You must be asleep the last 5 years because eventhough the dollar devalued heavenly the peso devalued even more. A 1:4 peso therefore lead not only to a weaker dollar but also to a even weaker peso.

And that will cost farmers lose profits.

[Redondo]

I guess you would have to hold the record for the quickest number of posts with the least content.

Geee! Not a record I'd cherish.

Let's start the personal insults and show how classy you are.

Or did you just run out of arguments?

[Argento]

This is especially posted for Rodondo.

Devaluation benefits exporters and therefore farmers. They sell in U$ and rather than losing 30% of their income, at a 4:1 exchange rate, they gain an increased ARG$ income of 20%.

Manufacturers generally favour a currency that is cheap because it makes them more competitive. If you have followed the AIRBUS Vs BOEING pricing of the past couple of years, AIRBUS is not competitive with BOEING because of the value of the Euro, apart from manufacturing matters.

[Argento]

If the peso goes to 1:4 against the dollar farmers lose 30% of the earnings

Well Redondo, you seem to have travelled a long distance since you first posted on this board. Our first discussion was about internal inflation and the line you took then was that internal price increases didn't increase the cost of exports. I said then that you were economically naive and I think I was right the first time. Now you expect that a 4:1 exchange rate is going to send the farmers here to the wall. But it ain't happened yet. Remember Mrs Beeton's advice about how to make a rabbit pie. "First catch your rabbit". In our context, the drop in the exchange rate has to take place before any of the suppositions you and a few other doom and gloom experts continually advance have a chance of occurring. The economy here is volatile but at the moment is going great guns. Internal inflation will continue, but with the 'rivers of gold', as a friend of mine here calls the soy export income, there is a lot of upside to the economy. Both for the farmers and the government.

At the rate you post, the contents of your posts ought to be devalued. At least there is a reason for devaluing your posts rather than ill-informed speculation on the Argentine economy, which you would have us believe is reason enough for a devaluation of the peso.

I guess you would have to hold the record for the quickest number of posts with the least content.

Geee! Not a record I'd cherish.

[Redondo]

Argentina really only exports agricultural products such as cereals and soy. Most of the manufactured goods that are exported are off-set against similiar imports from the Mercosur countries. As agricultural producers this country is reasonably efficient and with the world scarcity of grain and soy, which are not exported to the USA, the US is not a prime factor in this economy. I fail to see that the internal inflation will effect anything except the price of living here for expats. And that of course includes the cost of desirable pussy.

I repeat my mantra. "No recession here for a few years. Normal economics do not apply."

If the peso goes to 1:4 against the dollar farmers lose 30% of the earnings

[Argento]

Inflation will soon start to affect the competive edge and that will lead to a recession. Even sooner if the US crashes.

Argentina really only exports agricultural products such as cereals and soy. Most of the manufactured goods that are exported are off-set against similiar imports from the Mercosur countries. As agricultural producers this country is reasonably efficient and with the world scarcity of grain and soy, which are not exported to the USA, the US is not a prime factor in this economy. I fail to see that the internal inflation will effect anything except the price of living here for expats. And that of course includes the cost of desirable pussy.

I repeat my mantra. "No recession here for a few years. Normal economics do not apply."

[Redondo]

All this absolute speculation that the economy here is about to crash reminds me of Mark Twain, (of Tom Sawyer and Huckleberry Finn fame) In the belief that he had died, an obituary was published in a newspaper. Clements, Twain real name, wrote, "Rumours of his death are greatly exaggerated".

My real belief is that there is a lot of wishfull thinking going on. Pussy and general living expenses here are very volatile in their pricing. Mongers who can only remember prices immediately after the corralito and the upward spiral since, would do well to remember that this is the pattern here and has been for the 20 years that I know. Eventually it will fall into the hole the politicians are digging, but not just yet. The influx of Paraquayas reflects the fullish employment situation at present. There were very few just after 2002 because of the shortage of jobs. I know Geo Eye won't agree, but a lot of the woman who work in the industry, would prefer employment other than fucking strangers for money and putting up with all sorts of belittling requests.

So to cut to the Chase. The economy here is not about to shit itself; prices will continue to go up; those mongers hoping for a crash and a drop in prices are going to be disappointed and there will be more busloads of cheap imported pussy rolling down the Pan American.

Inflation will soon start to affect the competive edge and that will lead to a recession. Even sooner if the US crashes.