Argentines spend more money abroad than tourists bring in

[FrankPintor]

I think @Ries raises an interesting question... If you take the buy-sell spread as an indication of confidence in the currency, at 45 Pesos today the official Dollar merits less confidence than the blue Dollar rate with a spread of 20.

Why aren't the official and blue Dollar rates diverging like they have in the past? Are the BCRA's money-burning manipulations in the futures market enough to affect both rates?

 

[LuckyLuke]

To say big money or some cabal of puppeteers isn't somehow the market is my opinion a matter of semantics. The market is not some mysterious force. It is merely the platform (forex, bonds, bank repos, etc) by which a value is determined. The local price of fish for example, could be determined by fishermen, at a fish market, who specialize in fishing at sea. To say it's some wizard in a tower makes for dull analysis. The players on the market can be large or small, individual or collective, public state or private business. Politics certainly plays a large part in regulating a country, which can by it's nature affect the availability, and consequently the price of a commodity or currency.

 

[Ries]

To say big money or some cabal of puppeteers isn't somehow the market is my opinion a matter of semantics. The market is not some mysterious force. It is merely the platform (forex, bonds, bank repos, etc) by which a value is determined. The local price of fish for example, could be determined by fishermen, at a fish market, who specialize in fishing at sea. To say it's some wizard in a tower makes for dull analysis. The players on the market can be large or small, individual or collective, public state or private business. Politics certainly plays a large part in regulating a country, which can by it's nature affect the availability, and consequently the price of a commodity or currency.

I agree. The price of fish, or the dollar, can only be temporarily controlled by a government that can afford to impose a price and support that price financially and legally.
Obviously, the Argentine government has tried again and again to enforce a particular number, and consistently fails. It does not have the deep pockets, or the raw force, to enforce an exchange rate, without borrowing in huge amounts.

There is, indeed, a "market", and when all the cuevas on a given afternoon suddenly drop how many pesos they will give you for a dollar, its the market speaking. Its certainly not Caputo.
And when literally billions of USD are squirrelled away in safe deposit boxes and under mattresses, against the law, that is mos def "the market".
markets are moved by rumor, emotion, weather, war, and even politics.
The recent legal loss in the YPF case is a great example.

When I talk about "big money", I am talking about the wealthy argentines who own the major corporations, utilities, news, phone, and tv stations, and, by and large, are and have been politicians for decades, or in the case of some families, centuries. 90% of the arable land is owned by less than a thousand entities. Most of the major corporations you and I pay are owned by a very small group of people in Argentina.
Even business listed on the Bolsa are run, in reality, by bosses, not shareholders.
They dont get together and decide in their evil boardroom, but they do share common interests, and have the ears or the seats of a lot of elected politicians and judges.
Milei does not have a majority, or even a real political party.
The ideas of his that get made into laws are usually watered down by more traditional ideas about economics, and history.
His most radical changes have almost all been executive orders.

 

[Ries]

I want to know why the argentine central bank, which i am told sets the blue rate, decided that the YPF court decision was a reason to devalue the peso by 3%?
Because I have been told “the market “ had nothing to do with it, right?

 

[redlobster]

I want to know why the argentine central bank, which i am told sets the blue rate, decided that the ...

You're confused about who sets what. Do you really think Santiago Bausili, the president of the Banco Central, personally calls every cambio in the city and says, "Today you're buying dollars at X pesos"?

 

[Ries]

You're confused about who sets what. Do you really think Santiago Bausili, the president of the Banco Central, personally calls every cambio in the city and says, "Today you're buying dollars at X pesos"?

Obviously you have your irony filter turned off. Of course I dont. But just a few posts up, we are being told repeatedly that "the market" does not exist and has nothing to do with the exchange rate.
My stance on this is pretty clear if you have been reading anything I have been writing here for the last 18 years...

 

[LuckyLuke]

I think @Ries raises an interesting question... If you take the buy-sell spread as an indication of confidence in the currency, at 45 Pesos today the official Dollar merits less confidence than the blue Dollar rate with a spread of 20.

Why aren't the official and blue Dollar rates diverging like they have in the past? Are the BCRA's money-burning manipulations in the futures market enough to affect both rates?

It's an interesting question...I think the spread reflects ulterior motives between the BCRA and cueva. While a cueva may reduce their spread to encourage dollar transactions when demand is low, or increase it when demand is high. This is done to make a profit from a business venture perspective. The BCRA on the other hand may increase to spread to discourage dollar transaction, when it needs to redirect the resources elsewhere, this is done on a resource management perspective. The blue rate will diverge from the official only when the BCRA begins limiting (or the perception of a future limit) dollar acquisition.

 

[Ries]

Ulterior motives is pretty much the definition of market forces.
People and companies doing FX deals want the best deal possible.
The BCRA has a variety of motives, mostly political and PR, although it is possible some of them actually want less infation and better things for the citizens, although history has not been very supportive of that view.

 

[elhombresinnombre]

Before I changed it, I used to have a signature line at the bottom of my posts in BAExpats that read:

For every complex problem there is an answer that is clear, simple and wrong.

and I think that's the territory we are in here.

The extent to which the super rich are gobbling up what everybody else used to own is astonishing - but it's not just in Argentina. Perhaps we are too much like the frogs being slowly boiled in a pan and we don't feel the temperature rising in our home countries until it is too late because we are too close. But the statistics show that inequality is accelerating away in Argentina, in the UK, in the USA and almost everywhere, pushed along by the disappearance of middle-range jobs everywhere.

There are the professional jobs commanding more and more pay on an exponential scale as you get nearer the top and there are offers of unskilled menial, minimum wage, zero-hours contract work for the rest with vanishingly little else in between. Again, you can't say "only in Argentina."

On one reference, the debt to GDP ratio, Argentina ought to be comfortable and relaxed because, last time I looked it was only in the mid-eighty percent zone compared with the UK which is panicing because their ratio has topped 100. The USA is blustering its way much higher than that and the BBB is going to make it surge even higher but it doesn't seem to worry the people in charge. Meanwhile Japan bumbles along with a ratio of over 200% and everybody seems to think that's okay because it's Japan.

So the markets keep shunning Argentina because even at eighty-something percent debt-to GDP it's still Argentina and it's credit rating is junk. People keep pouring money into the USA despite remorselessly rising debt levels and the UK...

..the UK?

..Did you know that on Wednesday last week, worldwide the Pound Sterling suddenly dropped dramatically and UK borrowing costs rose up sharply? Why? Well it wasn't the financial indicators: they've been stable for a while. It was subsequently believed that the markets were spooked when the UK Finance Minister became tearful during a session in the lower house. Markets eh? Whatever they are they are neither clear nor simple.