A good time to hedge WU, MG, and other money transfers with a plazo fijo?

esensies

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If you live in Argentina, have an Argentine bank account, and do periodic money transfers from another country to pay your living expenses, it could be a good time to transfer a few extra pesos and put them in a plazo fijo (an interest bearing instrument that you can buy from home banking; you decide the amount and the number of days).

After the latest hike in interest rates by the Banco Central, a traditional plazo fijo is paying 6.1644 for 30 days. If you did a transfer to your bank account here today at 300/dollar (today's WU rate is 298 and MG rate is 298.78, excluding fees), and you put the money in a plazo fijo for 30 days and reinvested it every 30 days, you would have funds equivalent to a dollar rate of:
  • After 30 days - 318.49
  • After 60 days - 338.13
  • After 90 days - 358.97
I've transferred part of what I'll need for the next three months and put it in a plazo fijo. What I don't need at the end of the month I'll roll into the next 30 days. Yes, the dollar could spike up to 358.97 tomorrow, but the government is trying to hold down the "dólares libres (CCL, MEP, dolar blue, etc.)," and if they're even moderately successful, this should work out all right. In any case, the interest rate they are paying should protect me from most or all of the inflation of the next few months.

And in Argentina, the next few months is about as far ahead as you can ever look.
I hedge with work
 

hoda0010

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If you live in Argentina, have an Argentine bank account, and do periodic money transfers from another country to pay your living expenses, it could be a good time to transfer a few extra pesos and put them in a plazo fijo (an interest bearing instrument that you can buy from home banking; you decide the amount and the number of days).

After the latest hike in interest rates by the Banco Central, a traditional plazo fijo is paying 6.1644 for 30 days. If you did a transfer to your bank account here today at 300/dollar (today's WU rate is 298 and MG rate is 298.78, excluding fees), and you put the money in a plazo fijo for 30 days and reinvested it every 30 days, you would have funds equivalent to a dollar rate of:
  • After 30 days - 318.49
  • After 60 days - 338.13
  • After 90 days - 358.97
I've transferred part of what I'll need for the next three months and put it in a plazo fijo. What I don't need at the end of the month I'll roll into the next 30 days. Yes, the dollar could spike up to 358.97 tomorrow, but the government is trying to hold down the "dólares libres (CCL, MEP, dolar blue, etc.)," and if they're even moderately successful, this should work out all right. In any case, the interest rate they are paying should protect me from most or all of the inflation of the next few months.

And in Argentina, the next few months is about as far ahead as you can ever look.
This is interesting and definitely worth considering, but out of curiosity do you know if earned interest is something that must be claimed on Argentine taxes? In the US, if I had a lot of earned interest I'd be issued tax forms and need to claim that money when I completed my yearly taxes. How does that work here?

Being from the US, I'd also definitely want to keep it under 10k at the official rate - so less than 5k at the blue, to avoid complicating my US tax returns by having to declare the account/assets held outside the US.
 

sneakrnet

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This is interesting and definitely worth considering, but out of curiosity do you know if earned interest is something that must be claimed on Argentine taxes? In the US, if I had a lot of earned interest I'd be issued tax forms and need to claim that money when I completed my yearly taxes. How does that work here?

Being from the US, I'd also definitely want to keep it under 10k at the official rate - so less than 5k at the blue, to avoid complicating my US tax returns by having to declare the account/assets held outside the US.
You might have to claim earned interest on plazos fijos on your Argentine taxes. That has changed a couple of times and I don't know what the current state of that is. You might search the forums and if you don't find the answer, make a new post asking the question. A little googling might give you the answer fairly quickly, but make sure the information is up to date.

Are you saying keep the plazo fijo under 10k pesos? Or the earned interest? In any case, that's less than 35 dollars. I wouldn't bother those very busy people at the IRS with such a small sum.
 

Reply Guy

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This is essentially the carry trade. It can be very lucrative, people / institutions even borrow to capitalize on it. The risk is when doing it with an EM currency like the ARS is that it might blow up.
 

sneakrnet

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This is essentially the carry trade. It can be very lucrative, people / institutions even borrow to capitalize on it. The risk is when doing it with an EM currency like the ARS is that it might blow up.
If I were borrowing the dollars to buy pesos, that would be carry trade, but they're already my dollars, so it's a hedge, against the possibility that Massa is successful for a time at keeping down the "dólares libres."

I wouldn't borrow dollars to buy pesos. That's a much riskier proposition. (If I were going to borrow dollars to invest them, my choice of investment wouldn't be the Argentine peso.)
 
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