Argentine Economy

[Gandolf50]

Another holdout bond holder sues. It is not just Singer who wants to get paid in full. If CFK digs the hole any deeper, Argentina may go the way of Venezuela.

http://www.bloomberg.com/news/2014-1...tml?cmpid=yhoo

Tres3.

Argentina is going the way of Venezuela. The difference being that life in Venezuela before Chavez was pretty good, and they had plenty of cash flow. Its almost as if Chavez wrote a book and Cristina is reading it at night and following all his mistakes.

[Tres3]

Another holdout bond holder sues. It is not just Singer who wants to get paid in full. If CFK digs the hole any deeper, Argentina may go the way of Venezuela.

http://www.bloomberg.com/news/2014-1...tml?cmpid=yhoo

Tres3.

[Tres3]

However in this case, the dual exchange is an enormous benefit for tourists. If the "official" rate was determined solely by the market and the blue rate went away, I doubt that what would remain would be as high as the blue rate is today.

It's weird though, even back in 2002 through 2006 when the "official" rate was driven by the market there still were cambios. Maybe because you had to present ID when changing money even then and people trying to convert unreported profit needed the no questions asked services of the cambios.

Another reason that you will always have cambios in Argentina is the notorious slowness of the banks. A person might wait an hour or more at a bank, while a cambio only takes a few minutes. An ATM might be quick, but the average Argentine does not have an ATM card.

Tres3.

[Daddy Rulz]

Dual exchanges would be perceived as a risk by most tourists. I like budgets when I travel and like to limit the unknowns.

However in this case, the dual exchange is an enormous benefit for tourists. If the "official" rate was determined solely by the market and the blue rate went away, I doubt that what would remain would be as high as the blue rate is today.

It's weird though, even back in 2002 through 2006 when the "official" rate was driven by the market there still were cambios. Maybe because you had to present ID when changing money even then and people trying to convert unreported profit needed the no questions asked services of the cambios.

[Riina]

Why would it?

Dual exchanges would be perceived as a risk by most tourists. I like budgets when I travel and like to limit the unknowns.

[Moore]

Probably so for Latin Americans but not so much from other foreigners. Now if they devalued and tightened the spread between markets, that would be a tourism boom.

Why would it?

[Riina]

Surprise, Surprise.

http://www.bloomberg.com/news/2014-1...-tourists.html

Tres3.

Probably so for Latin Americans but not so much from other foreigners. Now if they devalued and tightened the spread between markets, that would be a tourism boom.

[Tres3]

Surprise, Surprise.

http://www.bloomberg.com/news/2014-1...-tourists.html

Tres3.

[Gandolf50]

Do Argie insurance companies ever even pay off?

I really doubt it. I know when you have a car accident there is a ten year wait to collect, if you ever collect. (they spend ten years dreaming up ways to cheat you!) Do they mention who is the insurer? My guess is either there is no insurance or they wont pay the premium so the carrier wont pay. Either way you dont get paid.

[DavieW]

Christ, what do you invest in if you're an Argie?

You don't invest as such, you make money in the same way as the political elite - you steal it.

[Tres3]

Christ, what do you invest in if you're an Argie?

If you are a smart Argie (I think that is an oxymoron), you invest in dollars, and pray that they are not stolen.

Tres3.

[Dickhead]

If I understood this right, they are going to re-calibrate the amount on which the 1.75% is paid by the change in the official exchange rate. Example for a $1,000 bond: Official rate starts out at say 8 to 1 so the $1,000 bond is worth 8,000 pesos and the interest is (8,000 x .0175) = 140 pesos. Now after a year the rate is 10 to 1. The bond is worth 10,000 pesos and the interest will be (1,000 x .0175) = 175 pesos. That's why that Argie politician says the holders will "benefit" if the currency is devalued. They will get more pesos. But hello, the devaluation was because of inflation and 175 devalued pesos aren't any better than 140 undevalued pesos. Plus they get screwed the whole time period between the adjustments because the coupon is based on the beginning of the period calculation.

So it's hard to see anyone buying these bonds. Yet, people buy lottery tickets. In my state, lottery tickets say right on the front: "Prizes equal 50% of sales." I say to my friends who buy lottery tickets, "Just give me a dime and I will give you a nickel and you will be better off." Why better off and not just the same? Because gambling is heads you lose, tails you win and pay taxes. Winnings are taxable and losses can't be deducted unless you are a professional gambler and even then you have to already be itemizing AND the loss has to exceed 2% of income. So really if you buy a lottery ticket in my state your return on a dollar is fifty cents minus the tax on fifty cents.

I guess you could win if the devaluation was way more than the inflation during the holding period. That could happen if the devaluation was long overdue, which it is, so maybe that is the potential appeal. Buy the bonds, eat some inflation, dump right after the devaluation and hope to come out ahead.

Christ, what do you invest in if you're an Argie? Real estate is so illiquid because of the lack of financing. The banks aren't safe. The bonds aren't safe. Their stock market is all fucked up. I guess you hold precious metals. Then your apartment gets broken into and your insurance won't pay off and you jump out a window.

Do Argie insurance companies ever even pay off?

[Member #4112]

Both the article Tres3 posted from Bloomberg and the article in the Buenos Aires Herald clearly stated:

The bonds are to be denominated in US Dollars.

The bonds are to be paid in Argentine Pesos at the OFFICAL EXCHANGE RATE, there was no guarantee in the Herald article on the official rate not being changed either up or down.

The bonds are to pay a whopping 1.75%.

The bonds will be governed by Argentine Law.

What could possibly go wrong?

[Canardly]

No I think that they are Peso Bonds with a return of capital based on change in the Official Dollar Exchange rate.

So if/when Argentina devalues, this will enhance the return on the bonds.

[Daddy Rulz]

Anyone, including an Argentine, who touches this offer with a ten foot pole ought to have his head examined.

http://www.bloomberg.com/news/2014-1...tml?cmpid=yhoo

Tres3.

The want to sell the bonds in dollars and repay them in pesos at the official rate? Are you fucking kidding me? The article does say they promise not to devalue the peso, so I'm sure that will work out fine.

I've got to get into the Sovereign Debt business.