Is the Milei "Transformation" Failing Already?

[ArgentinaVet]

Facts are excellent, 3-month old facts (@Bajo_cero2 's article is from January) are pretty useless with this government. I did search for recent data on the M1 - M3 measures of cash in the economy but I didn't find any from after January.

For those who, despite all evidence, "feel" that there's a plan behind this mess, how do you get from continuing high Peso emission, as the article says, to "Milei promises to criminalize monetary emission" (https://buenosairesherald.com/politics/congress-opening-speech-javier-milei-pacto-de-mayo) without stopping the Peso printing presses? Am I expecting too much logic and joined-up-thinking from Milei and his boosters here? And, more important to most of us than these feelings, how is the Peso overvaluation relative to the Dollar to be explained?

To go back to the Argenzuela analogy, Venezuela has had both Bolivar and Dollar inflation, but I expect mostly because it destroyed internal production and imports even basic foodstuff, which is not the case with Argentina (yet).

What I have been saying for months and many of you folks have been failing to understand is that Argentina is only cheap in dollars when there are politically caused price distortions and FX controls that result in a big spread between official and parallel FX rates. In the years when that was not the case (1990s, 2010-2012, 2016-2018) Argentina has been a relatively expensive place in USD. The natural state of equilibrium in Argentina under the current unreformed system is one of awful labor productivity (has actually declined 5% over last decade or two, compared with 30% increase in rest of LATAM), inefficient logistics/distribution, and among highest nominal tax rates in the world that combined to make the place quite expensive.

Milei haș been in office for only four months; expecting any sort of improvement in such a short time when he is trying to unwind 90 years of chaos, disorder, instability, inefficiency, corruption, socialist thinking, etc is simply naive.

The reality is for Argentina to ever achieve a stable economic system with consistent growth and low inflation the following has to occur:
current account surplus
fiscal surplus
unsubsidized utilities
simplifying tax system to promote maximum production
public health care and education systems that are not free for foreigners.
labor law reforms that make hiring workers a non risk and affordable.
special tax and inventive regime for FDI

These policies cannot be achieved overnight or without going through the pain of the transition process. Have some patience.

 

[Musicman]

What I have been saying for months and many of you folks have been failing to understand is that Argentina is only cheap in dollars when there are politically caused price distortions and FX controls that result in a big spread between official and parallel FX rates. In the years when that was not the case (1990s, 2010-2012, 2016-2018) Argentina has been a relatively expensive place in USD. The natural state of equilibrium in Argentina under the current unreformed system is one of awful labor productivity (has actually declined 5% over last decade or two, compared with 30% increase in rest of LATAM), inefficient logistics/distribution, and among highest nominal tax rates in the world that combined to make the place quite expensive.

Milei haș been in office for only four months; expecting any sort of improvement in such a short time when he is trying to unwind 90 years of chaos, disorder, instability, inefficiency, corruption, socialist thinking, etc is simply naive.

The reality is for Argentina to ever achieve a stable economic system with consistent growth and low inflation the following has to occur:
current account surplus
fiscal surplus
unsubsidized utilities
simplifying tax system to promote maximum production
public health care and education systems that are not free for foreigners.
labor law reforms that make hiring workers a non risk and affordable.
special tax and inventive regime for FDI

These policies cannot be achieved overnight or without going through the pain of the transition process. Have some patience.

Totally agree. It’s a huge task he has on his hands but seems he is progressing step by step. Rome or Buenos Aires wasn’t built in a day

 

[perry]

What I have been saying for months and many of you folks have been failing to understand is that Argentina is only cheap in dollars when there are politically caused price distortions and FX controls that result in a big spread between official and parallel FX rates. In the years when that was not the case (1990s, 2010-2012, 2016-2018) Argentina has been a relatively expensive place in USD. The natural state of equilibrium in Argentina under the current unreformed system is one of awful labor productivity (has actually declined 5% over last decade or two, compared with 30% increase in rest of LATAM), inefficient logistics/distribution, and among highest nominal tax rates in the world that combined to make the place quite expensive.

Milei haș been in office for only four months; expecting any sort of improvement in such a short time when he is trying to unwind 90 years of chaos, disorder, instability, inefficiency, corruption, socialist thinking, etc is simply naive.

The reality is for Argentina to ever achieve a stable economic system with consistent growth and low inflation the following has to occur:
current account surplus
fiscal surplus
unsubsidized utilities
simplifying tax system to promote maximum production
public health care and education systems that are not free for foreigners.
labor law reforms that make hiring workers a non risk and affordable.
special tax and inventive regime for FDI

These policies cannot be achieved overnight or without going through the pain of the transition process. Have some

Totally agree. It’s a huge task he has on his hands but seems he is progressing step by step. Rome or Buenos Aires wasn’t built in a day

Totally agree. It’s a huge task he has on his hands but seems he is progressing step by step. Rome or Buenos Aires wasn’t built in a day

Totally agree. It’s a huge task he has on his hands but seems he is progressing step by step. Rome or Buenos Aires wasn’t built in a day

He certainly is progressing the fastest in wanton destruction of Argentina in just 7 months . More businesses closed. highest inflation ever recorded. provinces not recieving funds, no money for public works. no money for culture, no money for sciences , no money for hospitals nor public universities , no hay plata for nada . Soon there willl be noone working as there is no pesos left to spend as no hay plata !

 

[ArgentinaVet]

He certainly is progressing the fastest in wanton destruction of Argentina in just 7 months . More businesses closed. highest inflation ever recorded. provinces not recieving funds, no money for public works. no money for culture, no money for sciences , no money for hospitals nor public universities , no hay plata for nada . Soon there willl be noone working as there is no pesos left to spend as no hay plata !

Milei haș been president for only four months plus one week.

The inflation we have experienced is not even close to the highest inflation ever experienced here or anywhere else; in 1989 it was 2000% annually.

The public sector is simple going to have to get used to living within the means the the taxpayer is able to provide and businesses/ individuals are going to have to get used to paying unsubsidized utilities. All the neighboring countries pay the actual cost of electricity/gas/water etc and we will have to get used to doing so as well.

If we want things to cost less then we have to insist that worker productivity increases, distribution/ logistics become more efficient, and that the tax system changes drastically in a way that makes it cheaper to produce goods and get them to the end user.

 

[Ruta Otto]

Milei haș been president for only four months plus one week.

The inflation we have experienced is not even close to the highest inflation ever experienced here or anywhere else; in 1989 it was 2000% annually.

The public sector is simple going to have to get used to living within the means the the taxpayer is able to provide and businesses/ individuals are going to have to get used to paying unsubsidized utilities. All the neighboring countries pay the actual cost of electricity/gas/water etc and we will have to get used to doing so as well.

If we want things to cost less then we have to insist that worker productivity increases, distribution/ logistics become more efficient, and that the tax system changes drastically in a way that makes it cheaper to produce goods and get them to the end user.

All well and good, but wages are also higher in neighboring countries.

 

[perry]

All well and good, but wages are also higher in neighboring countries.

The inflation that we are suffering now is much worse than the 1980s as its in all currencies which never ever happened in Alfonsins period . Yes there was 2000% inflation back then in local currency but for those who had strong foreign currencies the cost of goods was dirt cheap . Since December 2023 prices have gone up over 150% in US dollars . Can anyone show me another country that this has happened as in all cases with local inflation the foreign currencies have always strengthened as has been the case here as well until December 2023 . Since then the argentinian peso has strengthened 20% but the inflation has been over 100% making Argentina one of the most expensive countries of the planet in us dollars for the most basic products of clothing . electronics, furnitures, hushold goods , many food items , vitamins etc etc

 

[ArgentinaVet]

The inflation that we are suffering now is much worse than the 1980s as its in all currencies which never ever happened in Alfonsins period . Yes there was 2000% inflation back then in local currency but for those who had strong foreign currencies the cost of goods was dirt cheap . Since December 2023 prices have gone up over 150% in US dollars . Can anyone show me another country that this has happened as in all cases with local inflation the foreign currencies have always strengthened as has been the case here as well until December 2023 . Since then the argentinian peso has strengthened 20% but the inflation has been over 100% making Argentina one of the most expensive countries of the planet in us dollars for the most basic products of clothing . electronics, furnitures, hushold goods , many food items , vitamins etc etc

In 2002/2003 the Brazilian Real reached R$4/ $1 USD when it appeared Lula would win and the market thought he might be Hugo Chavez 2.0; by 2008 the currency had strengthen to R$1.6 per $1 USD while nominal prices in R$ went up about 50% in that time frame.

So a dinner that cost R$100 ($25 USD) in 2003 cost R$150 in 2008 ( $93.75 USD)

Why did the Real strengthen so drastically against the USD?
Commodities boom, tremendous economic growth in Brasil as a result of said commodities boom and correct economic policies continued under Lula, and a booming carry trade for securities denominated in BRL at a time of rock bottom interest rates in USA.

How could items be so expensive when measured in USD?
Poor labor productivity, inefficient logistics/ distribution (Brasil has a terrible road infrastructure and minimal freight railroads), byzantine tax system with high nominal tax rates.

 

[gringoexpress]

He certainly is progressing the fastest in wanton destruction of Argentina in just 7 months . More businesses closed. highest inflation ever recorded. provinces not recieving funds, no money for public works. no money for culture, no money for sciences , no money for hospitals nor public universities , no hay plata for nada . Soon there willl be noone working as there is no pesos left to spend as no hay plata !

there's money for F16s...

 

[Musicman]

In 2002/2003 the Brazilian Real reached R$4/ $1 USD when it appeared Lula would win and the market thought he might be Hugo Chavez 2.0; by 2008 the currency had strengthen to R$1.6 per $1 USD while nominal prices in R$ went up about 50% in that time frame.

So a dinner that cost R$100 ($25 USD) in 2003 cost R$150 in 2008 ( $93.75 USD)

Why did the Real strengthen so drastically against the USD?
Commodities boom, tremendous economic growth in Brasil as a result of said commodities boom and correct economic policies continued under Lula, and a booming carry trade for securities denominated in BRL at a time of rock bottom interest rates in USA.

How could items be so expensive when measured in USD?
Poor labor productivity, inefficient logistics/ distribution (Brasil has a terrible road infrastructure and minimal freight railroads), byzantine tax system with high nominal tax rates.

I lived in Rio during that period. Lets not forget about the biggest corruption scandal during that period in the history of Brazil that Lula was sent to prison for. Cristina managed to wangle her way out of her own corruption scandals. Should have been sent to prison also.

 

[Ronnie Hotdogs]

There are too many vested interests in maintaining the status quo.

Peronism will return in a slightly different form and the land owning elite will go back to having cheap government subsided labour.

Argentina’s mineral/agricultural riches will continue to be exported, without adding any value, for the benefit of a few.

Parts of West Africa are reforming more than this place.