Another horror story about doing business in Argentina

[Bairespirata]

There were a lot of time and opportunities to change the economic policies during Menems regime. The opposition and intellectuals could warned and protested against the steadily increasing external debt. People could have run into the streets before the catastrophe was a fact. But nobody did nothing because everone loved the peg to the dollar. Have anybody heard an Argentine feeling sorry about those foreign people who lost 75% of their saving due to the Argentine default?

[Pijudo]

Whats next - Argentine students storm the US Embassy and take all employees hostage for 444 days.

It is not Iran but Argentina has problems and the goverment is not very bright (although which one was?)

[Moore]

Whats next - Argentine students storm the US Embassy and take all employees hostage for 444 days.

[Hunt99]

As far as real estate values go, look in the Clarin clasificados, rents are in pesos, property for sale is in USD. In August 05 a female friend of my family bought a beautiful 5 bedroom apartment in Barrio Norte on Parana fronting Plaza Vicente Lopez for $300,000 USD, I bet the apartment was not worth 3x as much pre-corralito, because USD has been the medium for real estate prices, and prices held steady other than normal real estate fluctuations.

I think there was a huge drop in real estate prices in dollars during the crisis. So much so that even a low-roller like me gave some serious thought to swooping in and buying up some property. I recall looking at one property in Palermo Chico in 2002-03 which was quite similar to Jackson's old mansion which was available for US$500K. The same type of property in the same area is probably back up to the US$1M range today.

Of course, it's difficult to find buyers for such properties in the absence of a mortgage market. That illiquidity, when combined with the propensity of the Argie government to steal from foreigners, was enough to dissuade me from making that speculation. In hindsight it probably would have worked out, but hindsight is always 20/20.

I say this because Moore's analysis of the corralito is firmly based on hindsight. At the time, people were panicking and were desperate because of the uncertainty. For him, and especially for him in hindsight, it wasn't so bad. Of course, he wasn't a part of the Argie middle class which was wiped out by its government's ever-present stupidity.

It was a great time for somebody who, like me and like most of the posters on this board, is paid in dollars and had no real stake in the Argentine economy. Prices dropped 70% in dollar terms and the greenback was king. I think that this fact accounts for the divergence of opinions in this thread.

[Mpexy]

Given that Moore apparently still has to work for a living, apparently his own knowledge of how supply / demand and other economic expertise touted is limited.

I'm still more curious about how his photo gal is rated by himself as a 5, while no Madahos girls in the 10 trips he claims has ever been above a 2. Perhaps it's a fat fetish.

[Rock Harders]

Moore-

Instead of going off on a ridiculous and clearly angry tangent, why don't you specify exactly what these "blatantly false statements out of thin air" are? Toyota manufactures many of its cars in Kentucky, among other places in the US, yet is the car still not considered imported? Volkswagen manufactuers many of its US market cars in Puebla, Mexico however it is not considered a Mexican car, it is a German car. Of course today the world economy is globalized and lines of nationality are blurred but it is commonly accepted that a Ford is an American car and a Peugot is a French car, no matter where it is actually assembled. Ford is owned by Americans who want equivalent dollars for their cars, just as Peugot's parent co. Wants the equivalent in Euros for their car. A Volkswagen Golf here, clearly not a luxury car by an measure, cost over $40,000 AR to start, roughly the equivalent of a $14,000 USD low end Golf in the USA. Pre-crisis, that Golf would have cost $14,000 AR, so where is the "plain wrong here"?

As far as real estate values go, look in the Clarin clasificados, rents are in pesos, property for sale is in USD. In August 05 a female friend of my family bought a beautiful 5 bedroom apartment in Barrio Norte on Parana fronting Plaza Vicente Lopez for $300,000 USD, I bet the apartment was not worth 3x as much pre-corralito, because USD has been the medium for real estate prices, and prices held steady other than normal real estate fluctuations.

Why don't you actually refute my statements with factual information instead of making up asinine blanket dismissals because you refuse to accept the experiences of people other than yourself.

Suerte,

Dirk Diggler

[Moore]

Much of what Dirk writes is simply wrong, such as local DV debts being denominated in US$ and local cars being imported, also denominated in US$. Anyone with the slightest inkling of experience/knowledge here (or even common sense) knows better than that. When reading his posts, keep in mind that he has no idea what he is talking about and that he makes blatantly false statements out of thin air. He probably doesnt even know what "denominized" is supposed to mean when he writes it.

Dirk also seems to not have the slightest clue of how supply/demand works or how market values, such as real estate, are determined. Another thing to keep in mind when reading his posts.

And he calls experienced local people who know exactly what theyre talking about "knuckleheads", among other slurs. I could and should tear Dirk 100 new ones right now (actually been holding off), but that would be conduct unbecoming of a civilized forum member. Besides, its been more entertaining than irritating watching him repeatedly showcase his ignorance. He's set yet another precedent since posting his Chile paper from Delaware High.

[Rock Harders]

Andres,

Moore just refuses to accept that "his" experience is not the experience that the common Argentine had to deal with during the corralito and its aftermath. "His" experience being drawing a (large? Salary from a Multinational corportation in US Dollars, having US based Credit and Debit Cards and accounts. Moore, I bet if "your" dollar deposits at Banco Rio had been pesofied, you wouldn't be such a corralito denier.

Dirk

[Andres]

Newspapers, bus-colectivo, Fruit store, Butchery, Grocery store, etc cost much less than the 1000/ mo max cash withdrawl, which was and still is more than most Argentines make in a month anyway. Many larger grocers will accept plastic cards - I used them throughout the "crisis". Most major expenses can / could be paid via transfer or plastic, like rent / expensas / utilities. It was / is not necessary to take cash out of the banking system for the largest % of transactions. Many Argentines seem too stubborn to realize that and adjust, even wealthier ones. Tax evasion is another reason for some businesses only accepting cash.

A basket of goods that cost 200 pesos in Nov.-01 cost exactly 200 pesos in Apr.-02. Thus the peoples purchasing power declined by zero % and they lost nothing. The change in value of the peso against other currencies has no affect on this. If the Swiss Franc goes from 1.30/ dollar today to 0.40/ dollar tomorrow it doesnt affect me.

Now, a vacation abroad to Europe / USA / Japan did become 3x as expensive for peso holders / earners after the devaluation. Is that the "financial crisis" that people refer to? Ive personally lived thru much worse "crises" than that.

Do the math, and you will see that a family of 4 spent just in colectivos ARS 32 per week (4 x 5 x 2 x ARS 0.8) Add fruits, meat, dairy products, newspapers and the such and you easily get ARS 250 per week, which is ARS 1000 per month. You may have another experience but, from your own words, it is clear that you are "special" (not many people pay 500 salaries per month and pay their bills with plastic cards)

Only 8% of the grocery stores accepted cash cards. That's a fact that Visa and Mastercard reported during the corralito.

I wonder where you get that the purchasing power by late 2001 was the same as the one by April 2002.

Andres

[Moore]

Almost all cars here (Chrysler, Peugeot, Renault, Ford) are locally made in the Zarate area Dirk. Local cost base, duh. Did you think that 1997 Renault taxi that is falling apart and appears to have been manufactured in Budapest circa 1959 was imported from France!

I believe that many electronics/appliances are also made locally.

Regardless, these are luxury items that even Americans will cut down on during a recession. Relatively few Args even own a car.

Regarding house prices, owners are just living in a dream world if they think that their house is worth the same in US$ after the devaluation, but they can list their house and not sell it for as many years as they want. The economy was fully pesofied. I recently tried to buy gold at $35 per ounce but that artifical peg ended in 1974. Now its at $560 - now thats a loss. Nixon and the "director" of Fort Knox should be exhumed and hung.

Every existing loan/contract was pesofied by law to my knowledge. So if one did have USD and an existing obligation denominated in US$ (most were) they made out like a bandit. Everybody else that only had pesos was not affected. No gain, no loss. Their US$1000/mo lease was converted to 1000pesos, even though the contract explicitly states US$1,000.

So yes a vacation to Ibiza or an imported new BMW became 3X as expensive for peso holders. Such suffering!

[Rock Harders]

Moore,

You are forgetting about many items that were / are priced in United States Dollars. For whatever reason (currency instability, inflation, etc. Real estate in Argentina has long been priced in USD. That $100,000 AR apartment suddenly cost $300,000 AR to buy after the unpegging. The same goes for automobiles. Know of any Argentine car brands? They are all imported from France, USA, Japan, Germany or Italy, and the prices of the cars were suddenly 3x as expensive. Most electronic goods follow the same pattern. We all know that Argentina has an Romanian-like agrarian economy, so anything high tech, and thus imported shot up 3X in price.

The statement that the basic basket of goods, without inflation, did not shoot up much immediatly is probably true. Poor people only worry about getting food on the table, they never could buy houses, and they could dream on about buying a new car. What the crisis did was destroy the Argentine middle class, those people who, when the 1:1 peg was in effect, could buy a house, a car, and take an overseas vacation if they wanted to. Basically, they lived like many US middle class families live. Post-crisis, the number of middle class Argentines plummeted and now there is a small but rebounding middle class.

Suerte,

Dirk Diggler

[Moore]

Corralito was a restriction in the withdrawal from banks, originally from ARS 1,000 per month, a measure enforced to delay the collapse of the peso peg to the Dollar.

Most people in Argentina make daily transactions in cash: Newspapers, bus-colectivo, Fruit store, Butchery, Grocery store, etc. These people significantly reduced their expenditures, and the first ones that felt that impact were the poorest, those who live outside of the banking system. Thus the onset of the loothing on the poor neighborhoods before De la Rua resigned.

The main idea of the corralito was to avoid people with savings and credit deposits in Pesos cashing them and running to buy Dollars, wreaking the banking system. And the facts support that: Before the corralito, the 1 Peso was worth 1 Dollar, while after it was 3.5 to 1.

Andres

Newspapers, bus-colectivo, Fruit store, Butchery, Grocery store, etc cost much less than the 1000/mo max cash withdrawl, which was and still is more than most Argentines make in a month anyway. Many larger grocers will accept plastic cards - I used them throughout the "crisis". Most major expenses can/could be paid via transfer or plastic, like rent/expensas/utilities. It was/is not necessary to take cash out of the banking system for the largest % of transactions. Many Argentines seem too stubborn to realize that and adjust, even wealthier ones. Tax evasion is another reason for some businesses only accepting cash.

A basket of goods that cost 200 pesos in Nov-01 cost exactly 200 pesos in Apr-02. Thus the peoples purchasing power declined by zero % and they lost nothing. The change in value of the peso against other currencies has no affect on this. If the Swiss Franc goes from 1.30/dollar today to 0.40/dollar tomorrow it doesnt affect me.

Now, a vacation abroad to Europe/USA/Japan did become 3x as expensive for peso holders/earners after the devaluation. Is that the "financial crisis" that people refer to? Ive personally lived thru much worse "crises" than that.

[Andres]

Please can you define corralito Andres. I lived / worked thru it and have heard it 1000 times but I still don't know what is was. I accessed all necessary funds for personal / business use and noticed no problems.

I should mention that Ive never carried cash around in suitcases or buried it in my backyard or under my mattress. I think there was a 1000/ month cash withdrawl limit but that has no effect on me or a corporation.

I dont remember any problems making legitimate payments via check, transfer, etc (>90% of transactions)

Corralito was a restriction in the withdrawal from banks, originally from ARS 1,000 per month, a measure enforced to delay the collapse of the peso peg to the Dollar.

Most people in Argentina make daily transactions in cash: Newspapers, bus-colectivo, Fruit store, Butchery, Grocery store, etc. These people significantly reduced their expenditures, and the first ones that felt that impact were the poorest, those who live outside of the banking system. Thus the onset of the loothing on the poor neighborhoods before De la Rua resigned.

The main idea of the corralito was to avoid people with savings and credit deposits in Pesos cashing them and running to buy Dollars, wreaking the banking system. And the facts support that: Before the corralito, the 1 Peso was worth 1 Dollar, while after it was 3.5 to 1.

Andres

[Moore]

If you were a victim of the corralito, you wouldn't think so.

Please can you define corralito Andres. I lived / worked thru it and have heard it 1000 times but I still don't know what is was. I accessed all necessary funds for personal / business use and noticed no problems.

I should mention that Ive never carried cash around in suitcases or buried it in my backyard or under my mattress. I think there was a 1000/ month cash withdrawl limit but that has no effect on me or a corporation.

I dont remember any problems making legitimate payments via check, transfer, etc (>90% of transactions).

[Saba2]

Just reading a few comments and it is good to see everyone is on the subject. Consider what the problems were when Menem took over. Faced with hiper inflation, a military looking to take over, drug loads in the north and the existing congress with thier hands in everyones pocket. A police force full of vice lords, a SIDE that was trained my the Nazi and what more. Yes, in order to put it together he had to bribe, cut deals, allow so crazy stuff, but the counrty for tens years grew, had no inflation, jobs, high standard of living, and boy did it get development. New hotels, new factories, new farming, etc Yea, like the usa, he borrowed too long and too much and the world wide recession of 2001 caught him of target. Just as the usa dot com etc nearly killed us. So until your there trying to manage a bunch of crooks into allowing the country to grow cut some slack and just do not lesson to all the press looking for ab ad guy. Boy did he like women. Suggest you all read Peron and get some pervious insight into this country.