Cfk wins

[ndcj]

"Rubbery?" But I don't understand how there's any room for argument in the inflation debate anymore? I've been saving every receipt and delivery menu I've received since July 2009, and the proof is right there, hard as a rock (over 100% price increases on many items.) I appreciated Miles' point about WHY they have to lie about inflation (as I hadn't known about the indexed bonds), but at this point, is there a single consumer in Argentina who doesn't agree that the INDEC figures are, in fact, nothing but a blatant, blatant lie? (Counting... it ain't hard.)

My point was that both the INDEC and opposition figures are dodgy.

You, like a lot of expats, probably consume much more of the most inflationary goods and services in Argentina right now (rental prices, prepared food, entertainment, etc). Your personal experience of inflation is probably at the very high end of the spectrum.

Inflation numbers measure the economy's inflation, not your personal inflation. If you prefer the figures of the "independent" opposition, then let us know why you think the market basket used by them is any more valid than that used by INDEC in relation to the economy as a whole (again, not your personal consumption).

There is an entirely different index for measuring the rising cost of personal consumption, usually called a personal consumption expenditures price index.

Argentina's current inflation is relatively low in a historical context. From WWII until now, the average annual inflation rate in Argentina was over 200%. You can't ignore the effect that periods of hyperinflation have on peoples' actions. If you feel that inflation is creeping up, and you were around to experience the 20000% inflation of the early 90's or the 40-50% inflation of the the last crisis, you jack your prices up at the first sign because you don't want to be in the same position as last time. You change every peso you have into dollars or euros because you don't want to be in the same position as last time.

These actions can easily become a self-fulfilling prophecy, so inflation numbers becomes as much a public relations exercise as anything.

 

[citygirl]

How, for instance, can meat be sold at Mercado Central for around 30% of the retail price in a local carniceria or supermercado? It defies basic common sense that the supply chain up until Mercado Central accounts for only 30% of the cost-to-market of meat for the retailer. Someone, post-Mercado Central, is making a very tidy profit in the name of inflation.

And you are basing that on what exactly? How about the idea that for each business that touches that meat, each business who has seen their cost of doing business go up at least 50% over the last two years, is passing that cost along to the consumer. So the transport company that trucks the meat, the wholesaler that buys it and resells it, the supermarket or the carniceria that passes it on to the customer, etc. Plus their profit of course. Everyone wants to "get theirs"

Look at the external data on Argentina, not the local "independent" data, which is no more believable or independent than INDEC's data. The local "independent" data is politically driven just the same. The real numbers lie somewhere in the middle of the two sets.

I do look at external independent data. And the majority of it is much closer to the "bad numbers" rather than the government reported numbers.

The deflation of the peso against the US dollar and Euro will make your holidays and imports more expensive. It will make Argentina's exporters more competitive and increase domestic economic growth. It's the proudly stated policy of this government to reduce imports through quotas, tariffs, import substitutions, etc., and it's working.

1) So why are you saying that those who say the peso will be devalued are wrong? I'm aware of the reasons behind it and what many are saying is that it will continue and probably escalate post-election.

2) Sure it's working. Whether it's to the benefit of the consumer who have less choice and pay higher prices is up for debate.

What makes you think that the current policies are not creating further diversity in the economy? Argentina recently exported more manufactured goods than agriculture for the first time in it's history.

Well - maybe that's because the gov't has mandated that companies that import must export goods of equal value. So maybe not so much a cause of external demand.

As for the middle class flourishing - don't know. Maybe our experiences are different b/c I don't see businesses growing, people getting hired en blanco, people in investing in Argentina, etc. I see a lot of people out buying things but that's because the attitude seems to be "spend today b/c the prices will go up and my peso will be worth less tomorrow".

 

[starlucia]

You, like a lot of expats, probably consume much more of the most inflationary goods and services in Argentina right now (rental prices, prepared food, entertainment, etc). Your personal experience of inflation is probably at the very high end of the spectrum.

Actually, no. As a matter of fact, I live for free in an owned apt., eat 99% of my meals at home because I'm picky and consider BA restaurants to be abysmal, and for entertainment, stick to activities like walking, reading, and watching the DVDs I bring back from the States. Thanks for the sweeping generalizations about expats, though

 

[jb5]

For true economic growth and especially the growth of the middle class, Argentina needs foreign investment. That's plain fact. Therein is the problem. Argentina is not getting it and won't with it's current policies.

How long does everyone want to bet on soy?

 

[ndcj]

And you are basing that on what exactly? How about the idea that for each business that touches that meat, each business who has seen their cost of doing business go up at least 50% over the last two years, is passing that cost along to the consumer. So the transport company that trucks the meat, the wholesaler that buys it and resells it, the supermarket or the carniceria that passes it on to the customer, etc. Plus their profit of course. Everyone wants to "get theirs"

This is my point exactly. Costs obviously haven't gone up by that kind of percentage in a uniform basis across all businesses, otherwise the cost at the point of distribution would be increasing as well.

The farmer that grows the cattle, the transport company who trucks the cattle to the abattoir, the abattoir, the transport company that brings it to mercado central, etc, these businesses have presumably seen comparable increases in their costs. In addition, they've seen increased scarcity of their product as farmers move to grow soya because of it's export value.

So, why hasn't the cost of meat at the central market level increased by the same astronomical levels? Could it be that those closer to the consumer have figured out that they can profit handsomely from inflation?

I do look at external independent data. And the majority of it is much closer to the "bad numbers" rather than the government reported numbers.

A serious question - can you provide any examples? Most of the external data is parroted from either the INDEC numbers or the local "independent" figures. There is seemingly a lack of genuinely independent data on the question of inflation in Argentina, particularly with more information than just a headline number.

1) So why are you saying that those who say the peso will be devalued are wrong? I'm aware of the reasons behind it and what many are saying is that it will continue and probably escalate post-election.

I didn't say that. In this and other threads people are saying that the peso is like "toilet paper" and is heading for massive devaluation and a crash. It's the same prediction made by the same people all the time.

The government position is to maintain the peso at an average of 4.40 for the next year. This will widen the trade surplus in Argentina's favour and help the economy overall. Argentina has massive foreign currency reserves ($50bn+) with which to manage a very orderly decline of the peso.

2) Sure it's working. Whether it's to the benefit of the consumer who have less choice and pay higher prices is up for debate.

These are short term problems to solve a very long term problem. As more goods are manufactured in Argentina more competition can develop to lower prices and improve quality. You have to start somewhere, else you end up like the developed nationals currently struggling because they are completely beholden to the ebbs and flows of international speculation.

Well - maybe that's because the gov't has mandated that companies that import must export goods of equal value. So maybe not so much a cause of external demand.

Umm, where do you think these exported goods are going to? Are you saying they're sent up to Brazil and burnt or what? In any event, someone, somewhere, external to the Argentine economy, is paying for these exports.

Have a look in a supermarket in the countries neighbouring Argentina to see where exports are going.

As for the middle class flourishing - don't know. Maybe our experiences are different b/c I don't see businesses growing, people getting hired en blanco, people in investing in Argentina, etc. I see a lot of people out buying things but that's because the attitude seems to be "spend today b/c the prices will go up and my peso will be worth less tomorrow".

I don't disagree with you about the "spend today" mentality. I suspect where we disagree is about the cause. I think the cause is years of seeing the economy lurch from crisis to crisis, where everyone plans for the next crisis in a way that contributes to its own creation.

A big part of this is the capital flight where those with real money that could be being reinvested in the local economy are madly converting every centavo they can into "hard" currency. They don't invest adequately in their own business because they fear for the future, for the next crisis. This is completely understandable, and even prudent, on an individual level, but it also creates a snow ball effect, where capital flight is met with more capital flight and less investment.

I think it's an incredibly tough problem to address, and a problem for which there are incredibly few success stories around the world in modern history.

I think that history will ultimately look rather favourably at the economic and social policies of kirchnerismo, I guess we'll see in several years if I have to eat those words

 

[ndcj]

For true economic growth and especially the growth of the middle class, Argentina needs foreign investment. That's plain fact. Therein is the problem. Argentina is not getting it and won't with it's current policies.

How long does everyone want to bet on soy?

This supposedly self evident truth might be worth something if it were based on real information.

http://www.tradingeconomics.com/argentina/foreign-direct-investment-net-bop-us-dollar-wb-data.html

Argentina has the highest level of net foreign direct investment in the last few decades once you discount the statistical blip of the 2001/2002 bailout.

The money from soy exports is being used to build Argentina's economy through education spending, developing manufacturing and high tech sectors and direct spending on social development. These are the things that will ultimately develop a prosperous future for Argentina.

 

[citygirl]

Re the Mercado Central
1) Is it possible the gov't keeps the prices artificially low at MC - much like carne para todos? Honest question.
2) How much have prices increased at the mercado central over the last three years?

Also - farmers wouldn't have seen comparable increases in cost as the rest of the businesses you mention (base price of meat). Cattle out on land = a level of immunity from increases in wages, utilities, etc. I think it's safe to say that any urban company with larger headcount would have seen a disproportionally higher cost increase.

Also - can you please point me towards your data that shows that manufacturing exports surpassed agricultural? The latest data I could find shows that agricultural goods (including processed food) account for over 50% of the exports. Maybe I missed something?

Re external data - I have access to the reports prepared by foreign investment banks and consulting firms. Apologies that I can't share them but they are proprietary data.

 

[Ashley]

Well, there are quite a few who highly dispute the govt's numbers on both poverty and inflation so it is not as though Dani is the only one stating that.

Per the NYTimes in Feb '11: "The government’s official 10.9 percent inflation rate is less than half the estimate of private economists and firms like Ecolatina, which put inflation at 26.6 percent in a report last month. The official 12 percent number for poverty is also well below independent estimates of about 30 percent. "

And I hardly think it's breaking news or -the ranting of doomsdayers - that the peso has been propped up by the gov't and that several factors (including a planned changes in the real exchange rate) will probably lead to a decrease in the value. There's also a reason that those that have the ability to convert their pesos to other currencies do - and I'm not talking about locals.

I am certainly not a CFK supporter although I draw the line at personal attacks on her and yes, personally, I believe there were a lot of wasted opportunities to build a middle class, increase Argentina's presence in the international community, spawn succesful businesses and diversify the economy. And yes, I personally believe that 25 or 30% increases in salary/inflation isn't sustainable and at some point, the party is going to be over. The prediction is that the economy will only grow about 4% this year.


There are a lot of us that have concerns and dismissing all of them as typical short-sighted selfish expats is equally short-sighted.

I really don't pay much attention to the "facts and figures" when pertaining to Argentina. But in the 10 years I have been here, the villa in Retiro has grown by a significant amount and the villa near my house in Chacarita (villa de Fraga) continues to grow upwards and outwards. That says more to me about increasing poverty than any statistic...

 

[ndcj]

Re the Mercado Central
1) Is it possible the gov't keeps the prices artificially low at MC - much like carne para todos? Honest question.
2) How much have prices increased at the mercado central over the last three years?

Also - farmers wouldn't have seen comparable increases in cost as the rest of the businesses you mention (base price of meat). Cattle out on land = a level of immunity from increases in wages, utilities, etc. I think it's safe to say that any urban company with larger headcount would have seen a disproportionally higher cost increase.

I honestly don't know the answer to either of those questions definitively, but I doubt that they could pull off some kind of secret price accord to keep down prices, and why would they bother only so far as Mercado Central?

Farmers and rural businesses should, I would think, have seen similar levels of inflation, just in different forms, such as fuel costs, grain prices, etc. Perhaps not to the same extent, but most of their inputs have risen in price. There is also the effect of the claimed exodus from cattle farming towards more profitable soya crop.

Also - can you please point me towards your data that shows that manufacturing exports surpassed agricultural? The latest data I could find shows that agricultural goods (including processed food) account for over 50% of the exports. Maybe I missed something?

I've misplaced the source in my bookmarks, and I don't remember with enough certainty exactly where the line was drawn between manufactured vs raw materials. I'll try and find it and post it, but until then I'll retract the claim because I can't back it up.

Re external data - I have access to the reports prepared by foreign investment banks and consulting firms. Apologies that I can't share them but they are proprietary data.

Even if you can't share it, these reports typically disclose their sources or methodology if self-compiled. That information isn't proprietary usually.

 

[jb5]

Argentina has the highest level of net foreign direct investment in the last few decades once you discount the statistical blip of the 2001/2002 bailout.

The idea isn't to compare Argentina with Argentina. Compare it to it's once weaker neighbors, Brazil, Chile and Uruguay, who have blown past Argentina economically.

Some things just can't be disputed, Argentina is avoided like the plague by foreign investors because it is, factually, economically unstable.

This does not take away the good that has been done here. There is no doubt CFK has done some meaningful things that endear here to a large segment of the population.

But no credible economist thinks these things are sustainable. And anyone understanding even the basics of macroeconomics can not ignore that the out of control inflation will cause something major to give. It is just fact that there's a slowdown of growth throughout LAM that's highly impacting even the stable countries.

There is no one credible on the planet that does not forecast that the good times here can not possible keep rolling. When so many policies are unsustainable, something must and will give.

This does not mean there will be a major crash like 2002. But it does mean cuts in spending (entitlements) are inevitable as is the devaluation of the peso. How steep on both fronts will depend on commodity prices. We may see a 5:1 ratio at the end of 2012 or we may see a 6:1 before that. We can all just take our best guesses.

But again, no one credible is guessing there will not be a piper to be paid.