CFK alientating Mercosur partners

[nicoenarg]

I wonder when Brazil will start talking as it's only a matter of time...

Who are Argentina's biggest trading partners? I'm already surprised China aren't saying more since they import a lot of soya from Argentina?

Brazil's Argentina's biggest trading partner. China comes in second but I think China is getting a 'freer' pass so far. Besides, the Chinese stuck their head in every country possible and now they're facing pretty bad times ahead themselves. They're more focused on their EU investments at the moment rather than worrying about what the turkey-in-chief of Argentina is up to.

 

[toongeorges]

Who are Argentina's biggest trading partners?

Here are figures of 2010:

Trade partners, import/export/total trade (figures in millions of euro, world is 100%):
1. Brazil: 13,588.1/10,917.0/24,505.2 32.0%/21.2%/26.1%
2. EU27: 7,382.7/8,455.5/15,838.3 17.4%/16.4%/16.9%
3. China: 5,802.5/4,442.7/10,245.2 13.7%/8.6%/10.9%
4. US: 4,634.0/2,754.7/7,388.7 10.9%/5.4%/7.9%
5. Chile: 669.0/3,395.5/4,064.5 1.6%/6.6%/4.3%

Of these 5 major trading partners, the only ones that import more from Argentina than they export to Argentina are the EU and Chile.

How comes Chile imports more than 5 times as much from Argentina than it exports to Argentina?

 

[sesamosinsal]

It isn't too mind boggling when you understand why they're doing it in the first place. Argentina needs the cash reserves in the BCRA. The government may want to pay down debt with those reserves, and at the very least they want to make sure they have enough dollars to sell to strengthen (buy) the peso/prevent devaluation. In other words, CFK wants to pay the bills with those reserves...

International commerce is done in dollars. So, when a product is imported, someone in Argentina is selling their pesos to buy dollars. Those dollars come from Argentina's central bank. Not only do imports deplete the BCRA reserves, it weakens the peso, as pesos are sold -- supply and demand. More supply than demand = cheaper peso.

The biggest worry for us should be this: Argentina's currency is backed up by the BCRA reserves. So, why do you think they're trying to change the rules over there at the Banco Central? Why do they want to report inflationary targets and monetary base data only once a year instead of four times a year? Presently, the monetary base has to be 100 percent supported by the reserves. Why do you think they want to change that?

And if they don't pay their debt, it looks like the U.S. is going to take away some trading preferences.

 

[nicoenarg]

International commerce is done in dollars. So, when a product is imported, someone in Argentina is selling their pesos to buy dollars. Those dollars come from Argentina's central bank. Not only do imports deplete the BCRA reserves, it weakens the peso, as pesos are sold -- supply and demand. More supply than demand = cheaper peso.

The reason it is mind boggling is that just like just about anyone would know what you wrote above to be true, the reverse is also true. Any other country that imports Argentina's products pays Argentina in Dollars too. Kinda the whole point behind getting a huge trade surplus, which is what CFK is probably going for. However, herein lies the problem. You don't let me enter your house, I am not going to let you enter mine either.

Trade, or business is a two way street. It never was and never will be a one way street (that is why a lot of heavily government subsidized social/business plans don't work). It is still sort of a barter system between governments. Now Argentina is saying to others that they should get more benefits than the rest. And then people think that that is somehow going to continue unchallenged?

One doesn't need to think about it too much but just like CFK claims she is working for Argentina (which I highly doubt), Brazilian, Chilean, Uruguayan, Paraguayan, etc governments are working for their people (or claiming to).

This is going to bite Argentina in the butt very soon. The economy was headed for a collapse already with programs based on pseudo-economic thought (cooked up numbers to establish credibility? Really?!) but now CFK has made sure to put that journey to collapse on a fast-track; and that's what scares me.

I could rant on forever on this. But I will finish here with this: I just can't fathom how one (CFK!) can be so dumb as to not know how economics really work. It is simple demand and supply but others are not waiting to serve Argentina greater trade surplus on a silver-platter.

 

[Fabe]

Its just the perpetuation of a long tradition in argentine politics. leave a large enough goatfuck so u punish the people , take revenge on the next president , and a large enough mess to cover all your theivery.

 

[sesamosinsal]

The reason it is mind boggling is that just like just about anyone would know what you wrote above to be true, the reverse is also true. Any other country that imports Argentina's products pays Argentina in Dollars too. Kinda the whole point behind getting a huge trade surplus, which is what CFK is probably going for. However, herein lies the problem. You don't let me enter your house, I am not going to let you enter mine either.

Trade, or business is a two way street. It never was and never will be a one way street (that is why a lot of heavily government subsidized social/business plans don't work). It is still sort of a barter system between governments. Now Argentina is saying to others that they should get more benefits than the rest. And then people think that that is somehow going to continue unchallenged?

One doesn't need to think about it too much but just like CFK claims she is working for Argentina (which I highly doubt), Brazilian, Chilean, Uruguayan, Paraguayan, etc governments are working for their people (or claiming to).

This is going to bite Argentina in the butt very soon. The economy was headed for a collapse already with programs based on pseudo-economic thought (cooked up numbers to establish credibility? Really?!) but now CFK has made sure to put that journey to collapse on a fast-track; and that's what scares me.

I could rant on forever on this. But I will finish here with this: I just can't fathom how one (CFK!) can be so dumb as to not know how economics really work. It is simple demand and supply but others are not waiting to serve Argentina greater trade surplus on a silver-platter.

You're mistaken to say that CFK doesn't want trade with any of these countries. She wants trade, but she wants Argentina to break even at the worst and have a trade surplus at best. Trade is not always a two-way street. In fact, many countries maintain trade deficits with other countries; the U.S. has a huge trade deficit with China, for example. Argentina has a huge trade deficit with Brazil.

Trade deficits are especially worrisome now that the European Union looks to be heading for recession. Brazil's growth is slowing, which always affects Argentina. With the world economy looking like it's going to get worse before it gets better, it makes economic sense to close the trade deficit gap, especially because Argentina does not have very many sources of credit after defaulting on its debts. The dollars that importers would have to purchase are needed to maintain the stability of the economy, and with the new law they're wanting to pass, even that might be difficult.

I think the government is anticipating having to use the reserves. Otherwise, why would they want to pass this law that clamps down on transparency, and most importantly, repeals the law that mandates the monetary base (pesos) be backed 100 percent by dollars/gold?

I agree with your assessment that tough times are ahead. I disagree that it is economically ill-planned. I think it's their only choice. Without those reserves, who is going to help Argentina? Does anyone think that the IMF is going to come to Argentina's rescue? That would go over really with the kirchneristas..

 

[nicoenarg]

I'm sorry, I don't think I did a good job at explaining what I meant to say. I'm gonna reply to your post below, however I'm on my phone so hopefully I am not gonna mess this up.

You're mistaken to say that CFK doesn't want trade with any of these countries. She wants trade, but she wants Argentina to break even at the worst and have a trade surplus at best. Trade is not always a two-way street. In fact, many countries maintain trade deficits with other countries; the U.S. has a huge trade deficit with China, for example. Argentina has a huge trade deficit with Brazil.

I am not mistaken because I never said nor meant that CFK doesn't want trade with other countries. What I said and still say is that she is an idiot for thinking other countries are going to bend over and give her a trade surplus while their exports to Argentina are being blocked by this moron. And that is what I meant by a "two way street". Not that there is a balanced trade between countries but that there is "seemingly" free trade between the two. Now I said seemingly because trade between countries is never a 100% free flowing. The example of China and the US is perfect in this case. There is a trade deficit and the US is pissed about it because China has taken artificial economic measures to control their currency to give themselves an unfair advantage. Now the US could block Chinese imports, but they don't because it will bite the US in the butt! That's what a two way street is. You give something away to gain something and when you want to gain something, you gotta give something away too. These two might sound the same but the former is where you give something away on your own and the latter is where you HAVE to do it. It's the latter that CFK does not understand.

Trade deficits are especially worrisome now that the European Union looks to be heading for recession. Brazil's growth is slowing, which always affects Argentina. With the world economy looking like it's going to get worse before it gets better, it makes economic sense to close the trade deficit gap, especially because Argentina does not have very many sources of credit after defaulting on its debts. The dollars that importers would have to purchase are needed to maintain the stability of the economy, and with the new law they're wanting to pass, even that might be difficult.

Yes. Trade deficits are worrisome, however, you don't fix your trade deficits by refusing to buy someone else's products while trying to shove your own down their throat. This isn't Sicily and CFK ain't the Godfather. Like I already said, Brazil has been pissed at Argentina for acting like a brat, and sooner or later they will act to preserve their own. What's Cristina going to do then? What is she going to do when all these countries whose business is being hurt by this moron in charge tell her to take her country's problems and go F herself with them? What's her choice then? Venezuela? Cuba?

I think the government is anticipating having to use the reserves. Otherwise, why would they want to pass this law that clamps down on transparency, and most importantly, repeals the law that mandates the monetary base (pesos) be backed 100 percent by dollars/gold?

Don't quote me on this but I read some analysis that the government's already using the fast depleting reserves. It is no secret why they have taken the drastic and idiotic measures they they've taken. Among all the moronic controls on Argentina's own population's freedoms, trying to control other countries' business and expecting them to comply is the most baffling move still!

I agree with your assessment that tough times are ahead. I disagree that it is economically ill-planned. I think it's their only choice. Without those reserves, who is going to help Argentina? Does anyone think that the IMF is going to come to Argentina's rescue? That would go over really with the kirchneristas..

I don't think we have hard times ahead. Don't get me wrong, we were headed for hard times since the so-called recovery started in 2003. What I am saying is that if not in 2 years then within 5 years we'll see an economic collapse. It's inevitable, especially with the course the country's been put on since Oct., 2011.

I hope that addresses everything and I hope I didn't mess up anywhere. My thumb's tired now

 

[sesamosinsal]

I don't think we have hard times ahead. Don't get me wrong, we were headed for hard times since the so-called recovery started in 2003. What I am saying is that if not in 2 years then within 5 years we'll see an economic collapse. It's inevitable, especially with the course the country's been put on since Oct., 2011.

You are correct that they are using the reserves, and they have since 2010. The president of the Central Bank, Martin Redrado, who just happens to be on C5N live right now, was booted out because he refused to use the reserves. I will post the video here when they upload it to YouTube -- very, very informative stuff.

I agree with what you're saying, but protecting the dollars is key. Of course Brazil and other countries my respond with similar measures. However, unless the BCRA allows the peso to devalue, Argentina's exports will continue to fall (means less dollars) because of inflation (exports too expensive.) Such a devaluation would cause prices to rise. Stopping inflation, I think, is much more difficult politically than shutting off imports...

 

[nicoenarg]

You are correct that they are using the reserves, and they have since 2010. The president of the Central Bank, Martin Redrado, who just happens to be on C5N live right now, was booted out because he refused to use the reserves. I will post the video here when they upload it to YouTube -- very, very informative stuff.

I agree with what you're saying, but protecting the dollars is key. Of course Brazil and other countries my respond with similar measures. However, unless the BCRA allows the peso to devalue, Argentina's exports will continue to fall (means less dollars) because of inflation (exports too expensive.) Such a devaluation would cost prices to rise. Stopping inflation, I think, is much more difficult politically than shutting off imports...

I'd like to see the video .

I agree with what you said.

I think they got themselves in a mess and now know of no other way to get out of it. But if they think controlling imports is going to fix their problems, well they've got another thing coming.

These measures may work for a short amount of time but not for too long. They are not sustainable, kinda like the rest of their economic policies.

 

[arlean]

Thanks for this great subject and all your contributions. Toongeorges, thanks for this link which I have bookmarked.

I am REALLY interested in the economics in Argentina. Can you all give me other valuable web sites for economic research? And/or publications. And many thanks.