Article- What Lies Behind The Blue Dollar

[rrptownley]

From the Argentina Independent

The article seems well researched and taught me some things about the market and its forces.

 

[Samra2]

fantastic article and very simply put.
for the casual reader!

 

[ElQueso]

Great article.

I liked this quote:

"Most of Pablo’s clients are Argentines who call, each month, to buy dollars with whatever they have been able to keep from their monthly income."

Maybe the middle class and above call Pablo, but the poor call me (maybe a slight bit of hyperbole on my part, but still) (Matias - read this!)

And as a market where we're talking about as much as $30M a day, we're talking an $11B dollar a year industry (well, maybe $8B if you don't count weekends and holidays )! Not sure how much of that actually leaves the country, but an industry that big, whose commodity is something so important as a currency that keeps its relative value here, it will not be stamped out (given human nature), at least without some pretty significant (probably violent) methods.

Instead of trying to clamp down on something the government doesn't like (in general), this whole situation in Argentina with the blue dollar could be a message that countries ought to look at the things it finds the hardest to prevent its populace from doing and think about changing its policies, not cracking heads (even if only figuratively).

 

[sesamosinsal]

I can fully understand why the government implemented this policy, but it was clearly very shortsighted and no exit strategy was ever considered. While things have loosened up a bit, they did so rather begrudgingly, and they still seem to think that trying to control the market through threats and intimidation -- and not supply -- is going to work.

What Capitanich and the rest of the government want is to have total control over the currency exchange market. Isn't it strange that a government so opposed to monopolies (as in the media, for example) is in favor of the monopoly that is the Central Bank?

The market may be informal, but supply and demand are still very much present. If the government wants to stamp out the blue market, it's going to have to open up the "official" market to the vast majority of buyers and sellers, and the only way that is going to happen is by providing the best price to both buyer and seller.

Anything short of that will be futile.

 

[camel]

Wow, I never knew how the actual blue rate was calculated:

Calculating the Blue

In countries where currencies are convertible (i.e. most of them), the relative values of currencies are determined by the costs of an equivalent good in two different places. For instance, if a Big Mac costs $1 in the US, and $10 (pesos) in Argentina, then the exchange rate would be 10:1, or US$1= $10.
The trick is to find equivalent goods and current prices in different countries. DolarBlue.Net neatly solves this issue by tracking stocks of eight major companies offered on both Argentine and US exchanges. Every twenty minutes, their computers check the prices in both locations, take the average, and publish it as the blue, or parelelo, rate.
The companies used to calculate the blue rate (and their stock ticker in US/Argentina market) are:
Grupo Financiero Galicia S.A. (GGAL/GGAL)
Tenaris S.A. (TS/TS)
BBVA Banco Frances S. A. (BFR/FRAN)
Banco Macro S.A. (BMA/BMA)
Pampa Energía S.A. (PAM/PAMP)
Petrobras Argentina S.A. (PZE/PESA)
Petroleo Brasileiro S.A. (PBR/APBR)
Telecom Argentina S.A. (TEO/TECO2)

 

[sesamosinsal]

That doesn't add up.

Maybe the author got confused between the blue dollar and the contado con liqui? The calculation for the contado con liqui is totally different.

 

[donnay]

Interesting. I'm leaving for BA in the morning, and always wondered who it was that would pay for dollars. It makes sense, now.

 

[rrptownley]

I'd still like to know who supplies the dollars.

 

[Dublin2BuenosAires]

That doesn't add up.

Maybe the author got confused between the blue dollar and the contado con liqui? The calculation for the contado con liqui is totally different.

Not motivated to do it, but I am fairly certain if you mapped out the fluctuation of stock prices listed here against the dollar blue price fluctuation you'd see much more fluctuation in the blue.

I call shenanigans. This is not the blue rate calculation.

 

[Liquid]

That doesn't add up.

Maybe the author got confused between the blue dollar and the contado con liqui? The calculation for the contado con liqui is totally different.

A single ADR on the NYSE contains multiple units of stock. You can browse the ratio's here: http://www.adrbnymellon.com/dr_directory.jsp

Banco Galicia has a ratio of 1:10 meaning 1 ADR contains 10 units of real stock. Using your figures above gives the following:
AR$18.30 / ( US$15.46 / 10 ) = AR$11.83
Stock Merval (AR$) NYSE (US$) ADR/Stock Ratio GGAL/GGAL 18.3 15.46 1:10 11.837 TS/TS 209 35.58 1:2 11.74817 BFR/FRAN 53 13.83 1:3 11.49675 BMA/BMA 49.5 42.55 1:10 11.63337 PAM/PAMP 5.3 11.47 1:25 11.55187 PZA/PESA 7.2 5.99 1:10 12.02003 PBR/APBR 57 9.49 1:2 12.01264 TEO/TECO2 51.7 22.55 1:5 11.46341 Average 11.72041

As you correctly point out. 1 US$ = 11.72 ARS isn't the blue rate. It's safe to assume on DolarBlue.net the formula is applicable to the "CCL o GRIS.... Promedio del acciones" rate.

The article doesn't give the maths behind the DoloarBlue.net "Blue / Deep Blue" rate that tallies up with the website. DolarBlue.net states clearly the Blue rate comes from the "market maker". How this figure gets calculated and communicated back to the website is open to speculation.