Argentina to Sell Dollars In Parallel FX Market

[MilHojas]

Argentina to Sell Dollars In Parallel FX Market

Archived version

 

[Quilombo]

Brilliant, truly worthy of the Nobel Prize. They're going to cut off their nose to spite their face instead of accepting that the peso is over valued and that people/the market doesn't trust their governance.

Let's review the economic wins of the Milei administration after 7 months:

• No dollarization (abandoned officially in favor of "currency competition")
• Annual inflation remains in the triple digits
• Economic recession
• Reserves will now be pissed away to prop up the peso in the CCL market (Meet the new boss, same as the old boss)
• Cepo remains intact
• Still raiding caves
• Milei calling bankers golpistas (again, Meet the new boss, same as the old boss)
• Poverty at 60%
• US/EU food prices, Argentine salaries
• Tax increase on imports, purchases with debit/credit cards, and people earning pitiful salaries (ganancias)

I'd say he's asleep at the wheel, but that would require the Tweeter In Chief to be in Argentina long enough to get into the proverbial car since he averages a trip abroad about every 20 days since taking office.

 

[Ries]

In rio platenese, I believe that its pronounced "Shitter in Chief". It starts with an X now, not a T.

 

[Caribbean Cool]

This is really like living in history. Like Custer's last stand....this peso business. If the peso buckles after these shenanigans.....buy a wheelbarrow.

 

[FrankPintor]

This is really like living in history. Like Custer's last stand....this peso business. If the peso buckles after these shenanigans.....buy a wheelbarrow.

Black Wednesday - Wikipedia

en.wikipedia.org

 

[Rich One]

Argentina to Sell Dollars In Parallel FX Market

Archived version

Seems it's working all the dollars went down sharply MET, Blue, CCL. On the first day. .

 

[QuilmesSlo]

I am no economist, and I really like Milei (understanding that I am not a citizen so I say that as a mere observer).

That said, I am totally confused by this -- I would have thought Milei would get rid of all these different exchange rates and get a free floating currency at least (prior to dollarization). This sounds like classic argentina monetary short-term BS.

I welcome anyone who will educate me here on what I am missing/ don't understand.

 

[Ries]

milei has no party, no friends, no deputados, and no power. he talks big, but, in reality, he cant get anything done.
the people with the votes in congresso dont want any of the stuff he talks about, so it isnt happening.
seems pretty simple to me.
he has been able to get a few executive orders, but nothing like the magnitude of his platform.

 

[antipodean]

I am no economist, and I really like Milei (understanding that I am not a citizen so I say that as a mere observer).

That said, I am totally confused by this -- I would have thought Milei would get rid of all these different exchange rates and get a free floating currency at least (prior to dollarization). This sounds like classic argentina monetary short-term BS.

I welcome anyone who will educate me here on what I am missing/ don't understand.

Politics and finances.

Despite the austerity of this government, the Argentine state still needs a lot of money to keep the lights on and keep up with its pre-existing public debt to the order of about half-a-trillion dollars.

From a financial point of view, this government still depends on the financing model that it inherited which is based to a large degree around things like retentions and capital controls like PAIS tax etc in the moment they transact, so the government can essentially pocket the difference then and there, rather than just have everyone paying their dues directly as taxes as in pretty much all other "normal" countries. Despite the fact that removing retentions and CEPO would likely result in increased exports and financial inflows to then potentially tax, changing the existing model to another is not, and will never be, a simple cutover from one day to the next without generating a massive operating deficit during the transition which whatever government of the day would then need to have the financial reserves (or lines of credit) to be able to pay for all the things they owe as and when they fall due.

From a political point of view a floating exchange rate would have inevitably been far more painful and thus unpopular than the controlled devaluation already experienced, especially so early on in a political administration when market confidence is yet to be tested. If you consider that costly energy subsidies and a high spending on social welfare still exist today, you can see that this government is indeed walking a fine line between austerity and the populism-de-siempre that on one hand keeps society from exploding, while on the other still needing to own that half-a-trillion dollar public debt without defaulting on something and causing a panic.

In the meantime this latest move to me is just another form of juggling these realities in an attempt to have a somewhat orderly transition... although am almost certain that it will generate yet another economic distortion before this decades old currency circus of Argentina is finally over.... while the CCL and MEP can be brought down towards the official like this, as long as the CEPO and PAIS tax still limits peoples accessibility to "cheaper" dollars or forces them to buy a higher official dollar (e.g. Dolar Tarjeta/ Turista) then the blue and the prices it traditionally pulls with it are not likely going away anytime soon - which in practice takes many people and businesses back to the problem of getting paid in pesos at lower dollar to then need to pay costs in pesos based on a higher dollar, unless they can pay and get paid in the same dollar which as yet is still easier said than done.

 

[Caribbean Cool]

This is really like living in history. Like Custer's last stand....this peso business. If the peso buckles after these shenanigans.....buy a wheelbarrow.

And the peso is starting to buckle.....if it goes any lower it will be a declaration that the government (back to 1465 Blue this afternoon) saying that it has to guard its own reserves and there is nothing more it can do to prevent freefall. Mark my words.......