Blue dollar rate

[Johnny]

I eagerly scarfed up pesos at 130 today at my cueva. Truly amazing.

 

[antipodean]

https://www.infobae.com/economia/20...r-de-manera-gradual-los-controles-cambiarios/

Enjoy it while it lasts - the blue may soon be a thing of the past (or something with very slim margins as it was in the Macri years) depending how far the lifting of FX controls go. But for sure this signals that an official devaluation is looming and inflation will skyrocket as maximum prices are lifted on the basic consumer basket. If changing to pesos now make your you have something to spend them on in the coming weeks...

 

[jblaze5779]

So when they say gradually they mean over the course of this presidential term and then it'll be up to the next person to figure out the rest?

 

[antipodean]

I think the timing will depend on how desperate it gets to reach an agreement with creditors and secure whatever bailout measures it needs without ending up as a total pariah state and having AR planes impounded when they touch down abroad.

Argentina’s creditors want to know the country is capable of doing business to generate the $$$ before agreeing to whatever sub-optimal repayment deal is on the table.

 

[BankNote]

https://www.infobae.com/economia/20...r-de-manera-gradual-los-controles-cambiarios/

Enjoy it while it lasts - the blue may soon be a thing of the past (or something with very slim margins as it was in the Macri years) depending how far the lifting of FX controls go. But for sure this signals that an official devaluation is looming and inflation will skyrocket as maximum prices are lifted on the basic consumer basket. If changing to pesos now make your you have something to spend them on in the coming weeks...

Could you elaborate please. As to what is expected.. And how it will affect things.

 

[antipodean]

Could you elaborate please. As to what is expected.. And how it will affect things.

The value of the blue is mostly linked to the strictness of exchange controls - the scarcity of dollars versus demand. The looser the controls, the lower the value of the blue and the smaller the "brecha" that expats currently enjoy will be.

It is expected that the government will relax exchange controls aimed at making it easier to inject dollars into the economy, primarily this is aimed at the business sector since the government needs this sector to be able to generate money to be able to service the debt and this sector is complaining that they are being strangled by FX controls. This is something that Argentina's creditors don't like and seems to be one of the reasons they are currently not being so forthcoming in settling on a debt deal.

In recent days / week even Alberto has stated that he does not like currency controls of any form and that he believes in a free floating currency - in a similar way that Argentina had for the first years of Macri. That government was forced to reintroduce a CEPO reminiscent of the Cristina years to avoid the states USD being depleted and try to keep inflation under control. These measures were continued by the current President and expanded to become even more strict, including the reintroduction of various parallel dollar rates and various changes to rules regarding the use of CCL and MEP which the financial, import and export sectors operate on which saw the return of the Blue rate - something that was not really a thing during the pre-CEPO Macri years.

For example, if the government removed the US$200 a month limit on purchasing FX for private persons (and the various other consequences that are applicable to those taking advantage of this right to buy dollars legally for personal savings or use) then it would be cheaper for those persons to buy dollars at $90 (solidarity tax included) instead of $130, meaning the blue rate would drop down to something closer to $90.

Demand for the blue would also decrease even if dollars were only even slightly more easily accessible for business and financial transactions, since for example one could access them via CCL or MEP at $116 as until fairly recently. After they were restricted the value of the Blue took off to reach what we have today. The value of the blue has also surged in the past weeks as the exchange control regime has become even more aggressive in restricting the quantity of USD bank transactions in Argentina - meaning even having USD in the bank does not mean you are totally free to use them without risking your account being frozen.

The "worst case" would be the government taking all brakes off the Peso and leaving its value to the market, given confidence issues and inflation it is likely this would likely leak to a shock devaluation before potentially stabilising.

The inflation shock will come when the "maximum prices" imposed on a broad selection of basic household goods and services is lifted meaning producers can set their own prices again. Their costs will also increase once the emergency measures on labour costs etc are lifted since in most cases salary adjustments have not been cancelled, they have just been deferred and many other input costs have been subject to inflation over these months which they will need to recover and pay for - this is something many business lobby groups have been complaining about. If you consider that for a large section of the population, this basket of goods constitutes the majority of their spending then it makes for a big jump in the inflation stats. The real effect is that it weakens the purchasing power of whatever pesos are laying around.

 

[on the brink]

About a year and a half ago the blue was lower than the official rate. When I phoned the cueva to check rates, they advised me to go to the bank, where I would get more pesos for my dollars.

So, anything can happen. And probably will...

 

[BankNote]

About a year and a half ago the blue

I remember BA seemed expensive those days and I was happily using my foreign credit card everywhere.. there was no need to use cash at all..

 

[jblaze5779]

The value of the blue is mostly linked to the strictness of exchange controls - the scarcity of dollars versus demand. The looser the controls, the lower the value of the blue and the smaller the "brecha" that expats currently enjoy will be.

It is expected that the government will relax exchange controls aimed at making it easier to inject dollars into the economy, primarily this is aimed at the business sector since the government needs this sector to be able to generate money to be able to service the debt and this sector is complaining that they are being strangled by FX controls. This is something that Argentina's creditors don't like and seems to be one of the reasons they are currently not being so forthcoming in settling on a debt deal.

In recent days / week even Alberto has stated that he does not like currency controls of any form and that he believes in a free floating currency - in a similar way that Argentina had for the first years of Macri. That government was forced to reintroduce a CEPO reminiscent of the Cristina years to avoid the states USD being depleted and try to keep inflation under control. These measures were continued by the current President and expanded to become even more strict, including the reintroduction of various parallel dollar rates and various changes to rules regarding the use of CCL and MEP which the financial, import and export sectors operate on which saw the return of the Blue rate - something that was not really a thing during the pre-CEPO Macri years.

For example, if the government removed the US$200 a month limit on purchasing FX for private persons (and the various other consequences that are applicable to those taking advantage of this right to buy dollars legally for personal savings or use) then it would be cheaper for those persons to buy dollars at $90 (solidarity tax included) instead of $130, meaning the blue rate would drop down to something closer to $90.

Demand for the blue would also decrease even if dollars were only even slightly more easily accessible for business and financial transactions, since for example one could access them via CCL or MEP at $116 as until fairly recently. After they were restricted the value of the Blue took off to reach what we have today. The value of the blue has also surged in the past weeks as the exchange control regime has become even more aggressive in restricting the quantity of USD bank transactions in Argentina - meaning even having USD in the bank does not mean you are totally free to use them without risking your account being frozen.

The "worst case" would be the government taking all brakes off the Peso and leaving its value to the market, given confidence issues and inflation it is likely this would likely leak to a shock devaluation before potentially stabilising.

The inflation shock will come when the "maximum prices" imposed on a broad selection of basic household goods and services is lifted meaning producers can set their own prices again. Their costs will also increase once the emergency measures on labour costs etc are lifted since in most cases salary adjustments have not been cancelled, they have just been deferred and many other input costs have been subject to inflation over these months which they will need to recover and pay for - this is something many business lobby groups have been complaining about. If you consider that for a large section of the population, this basket of goods constitutes the majority of their spending then it makes for a big jump in the inflation stats. The real effect is that it weakens the purchasing power of whatever pesos are laying around.

Just wait until these layoff protections are gone and 75% of the private sector workers are cut....

 

[jblaze5779]

I remember BA seemed expensive those days and I was happily using my foreign credit card everywhere.. there was no need to use cash at all..

I remember this too. All my local coworkers were begging me to bring dollars and I didn't know why.... It didn't make sense to me (because there was really now difference in the rates). As soon as the paso happened it all made sense.