Article- What Lies Behind The Blue Dollar

[sesamosinsal]

A single ADR on the NYSE contains multiple units of stock. You can browse the ratio's here: http://www.adrbnymel...r_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.

Exactly. That is exactly how the contado con liquidación is calculated.

The article explicitly states, however, that the Blue Rate is calculated by dividing the Argentine stock price by the New York price, which is not the case.

 

[sesamosinsal]

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

The sellers?

The number of U.S. dollars hidden beneath Argentine beds, floorboards, and foreign bank accounts is mind-boggling. By some estimates it hovers near $50 billion; by others, it's much more than that; and by virtually every measure, it's a significant chunk of the total dollar-denominated cash floating around the globe. Argentines are believed to hold somewhere upwards of one in every 15 cash dollars circulating around the world.

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/07/31/argentinas-insatiable-and-destructive-appetite-for-u-s-dollars/

 

[Liquid]

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

As we're talking about physical objects. There's no magic. If the market needs US$1m of new notes, then the Bond Market is the obvious option. As long as the buyer can justify the origin of the funds either here or abroad there's a billions of ARS/USD denominated bonds in the market. There are no restrictions on the volume of a MEP operation. Once turned into physical bills by the central bank, they can enter the black market.

Alternatively the dollar bills have to be physically smuggled into the country. However, it's safe to assume they never leave, meaning they continue to circulate here, or they're "wired" out via a curva. Meaning they stay in circulation.

Either way, if these bills flood the black market then commissions to "wire funds" into Arg increase, as they don't want additional dollars.

 

[Liquid]

Exactly. That is exactly how the contado con liquidación is calculated.

The article explicitly states, however, that the Blue Rate is calculated by dividing the Argentine stock price by the New York price, which is not the case.

AFAIK CCL relates only to bonds, the article talks only about Blue Chip swaps. Alas, although it's a good article, the "facts" weren't checked thoroughly prior to publication.

 

[Dublin2BuenosAires]

Another source is:

Joe Peso buys from his bank out of his salary at the official rate + 20%

He leaves the bank with his greens and heads for the nearest arbolito. So long as the blue = official plus at least 20% he sells those central reserve dollars back into the black market making on average around 30% on the pesos he bought the dollars with. Those pesos are increasingly being used for the average argentine to live and pay cash expenses. Many people I know do this to pay off credit cards for example.

if they been good boys and girls, and have a decent accountant, they'll be able to reclaim their 20% at the end of the tax year. I've done that before, not impossible.

The gov has recently come into a Yen fortune courtesy of our friends in the orient. They sell those on the int'l currency market and push dollars back into the reserve.

 

[sesamosinsal]

AFAIK CCL relates only to bonds, the article talks only about Blue Chip swaps. Alas, although it's a good article, the "facts" weren't checked thoroughly prior to publication.

The liqui can be obtained through both bonds and stocks, so long as they're both transacted in Buenos Aires and New York.

 

[AmigoArtistico]

AFAIK CCL relates only to bonds, the article talks only about Blue Chip swaps. Alas, although it's a good article, the "facts" weren't checked thoroughly prior to publication.

"Contado con liquidación" can be done (and is done) with either bonds or stocks, but certain bonds are favorites for this transaction.

There have been hundreds of articles in the newspapers about what it is and how it works (and how it's now being severely restricted, and the effects that this has on the economy, and why).

 

[Hybrid Ambassador]

Another source is:

The gov has recently come into a Yen fortune courtesy of our friends in the orient. They sell those on the int'l currency market and push dollars back into the reserve.

You mean the "Renminbi" or more universally known as the "Yuan". From the PRC the numero "2" in GDP..Soon to be the new owner...Of all Yacimiento Petrolifero, all the Bife and Sojas...

The Yen you refer to is the currency of Japan.

 

[sesamosinsal]

The mentioning of the yen is kind of funny. The BOJ looks to its Argentine counterparts with envy...

http://www.economist.com/blogs/banyan/2014/10/japans-quantitative-easing