Confirmed: the BCRA is intervening in the exchange rate.

[Redpossum]

Perhaps, but IMO there's no fooling the IMF when you have 20 billion riding on it. If you can read this chart, so can they.

I have my own theory that Argentina is a stain on the IMF's public image. It knows that Milei is on board with the austerity they need for their cookie cutter "economic recovery program". They are willing to posture and telegraph support for Milei to win him future elections (and continue the program), but the truth is that the 20 billion is just refinancing old IMF debt. There's no magic public works, employment program, new export sector, etc. investment coming from these funds. It's just more austerity for more time and more tinkering with various tax and import/export restriction levers to see if an "economic recovery" eventually manifests.

If it didn't work the first time, double down for longer.

Now you're talking sense.

At the point in 2001 when it all came apart, Argentina owed the IMF 100 billion USD. Which means they've played this game before, so they have to know how it ends. Somebody wants Argentina as a failed state.

 

[FrankPintor]

I'm not entirely sold that this was an intervention in the way that you are thinking. The BCRA per IMF "guidance" wouldn't intervene until the upper limit of the exchange rate range ($1400). There are however distortions in foreign trade where the demand in dollars for imports/exports can require the BCRA to inject liquidity. Although this is still notable to the blue market if it ultimately reduces net foreign reserves, it's not that the BCRA is stepping on the exchange rate per se.

I recently read that the momentary reduction of export taxes had produced record liquidations of crop yields which should bolster foreign reserves, though the program is expiring soon.

I think the focus was more on the bottom of the band, 1000 Pesos per Dollar... if I recall correctly, it was a stated aim of the government to drive the Dollar down to the lower band limit, and then buy cheap Dollars for the BCRA reserves under the guise of following the IMF guidelines.

As we know, that didn't work, and that's why the financial genuises decided to take out yet another loan (because, when you're on the hook for 64 billion, or hundreds of billiones as @jlynch pointed out, then, who cares?) and park the new 2 billion in the BCRA reserves claiming that the IMF criteria are met.

 

[FrankPintor]

Perhaps, but IMO there's no fooling the IMF when you have 20 billion riding on it. If you can read this chart, so can they.

I have my own theory that Argentina is a stain on the IMF's public image. It knows that Milei is on board with the austerity they need for their cookie cutter "economic recovery program". They are willing to posture and telegraph support for Milei to win him future elections (and continue the program), but the truth is that the 20 billion is just refinancing old IMF debt. There's no magic public works, employment program, new export sector, etc. investment coming from these funds. It's just more austerity for more time and more tinkering with various tax and import/export restriction levers to see if an "economic recovery" eventually manifests.

If it didn't work the first time, double down for longer.

I've read that the "stain on the IMF's public image" metaphor describes what private creditors are feeling with respect to the IMF's loans to Argentina. The loans are so far outside the IMF's mandate that private creditors consider that the IMF should take its place in the queue of creditors to be repaid in the event of a default, rather than being first in line as now.

I don't actually feel that pessimistic about the future here, the natural resources (primarily Vaca Muerta, there's even more of course) are so big that, even with a minimum of competent management, Argentina will come through. Whether that trickles down to the rest of us in the normal economy is another question, of course. Shale gas sells itself in Europe these days. The logical thing for the government to do would be to accelerate investment and do the LNG processing on land (much higher capacity) rather than on ships.

I still maintain that, apart from making government more efficient, and rooting out corruption, none of the austerity was actually necessary. It was just blind ideology, mixed up with random on the spot decision making and u-turns. It's a pity that a twit like Milei stands to profit from circumstances and investments he had no hand in.

My forecast: @LuckyLuke will be renting 10sqm of tent space in his back yard in Neuquen for $1000 / month in 2-3 years.

 

[Ronnie Hotdogs]

I've read that the "stain on the IMF's public image" metaphor describes what private creditors are feeling with respect to the IMF's loans to Argentina. The loans are so far outside the IMF's mandate that private creditors consider that the IMF should take its place in the queue of creditors to be repaid in the event of a default, rather than being first in line as now.

I don't actually feel that pessimistic about the future here, the natural resources (primarily Vaca Muerta, there's even more of course) are so big that, even with a minimum of competent management, Argentina will come through. Whether that trickles down to the rest of us in the normal economy is another question, of course. Shale gas sells itself in Europe these days. The logical thing for the government to do would be to accelerate investment and do the LNG processing on land (much higher capacity) rather than on ships.

I still maintain that, apart from making government more efficient, and rooting out corruption, none of the austerity was actually necessary. It was just blind ideology, mixed up with random on the spot decision making and u-turns. It's a pity that a twit like Milei stands to profit from circumstances and investments he had no hand in.

My forecast: @LuckyLuke will be renting 10sqm of tent space in his back yard in Neuquen for $1000 / month in 2-3 years.

Advantage of FLNG is of course that when it all goes tits up you simply sail your investment out of Argentina.
Bit more difficult when it's on land.

Also it's much easier to build an FLNG plant in a Far East shipyard where you have a highly skilled workforce than trying to do it all here from scratch.

I think for various reasons it's not a bad thing that they have went with FLNG.

 

[Bajo_cero2]

Well, this was always obvious. How do you thinK they waste all the loans with the IMF? This is the story of the Argentine external debt: 1976/82 about 70 billion, 1990/2011 another 90 billion, 2017/21 another 70 billion and the same since Milei got into power. It was always used to

intervening in the exchange rate.​

 

[FrankPintor]

Advantage of FLNG is of course that when it all goes tits up you simply sail your investment out of Argentina.
Bit more difficult when it's on land.

Also it's much easier to build an FLNG plant in a Far East shipyard where you have a highly skilled workforce than trying to do it all here from scratch.

I think for various reasons it's not a bad thing that they have went with FLNG.

Yes, you have to start somewhere, of course, and with FLNG, exports can start in the short term.

As you imply, FLNG is for nervous investors who can sail their tankers off into the sunrise when it all goes sideways.

But, given the size of the gas fields, FLNG is going to become a bottleneck. Like I said, land-based LNG processing can have much higher capacity, which is what Vaca Muerta really needs.To kickstart that, the government would really need to put its money where its mouth is, something they've repeatedly refused to do, even to repatriate foreign earnings by individual members of the cabinet.

The government dresses it up as austroshit ideology, of course, but foreign investors will be looking and saying "nah, they don't want to put their money here, we don't either".

 

[LuckyLuke]

My forecast: @LuckyLuke will be renting 10sqm of tent space in his back yard in Neuquen for $1000 / month in 2-3 years.

I was going to say, if you want to see trickle down Vaca Muerta money, come on by for a haircut in Neuquen - only $27,000.

Well, this was always obvious. How do you thinK they waste all the loans with the IMF? This is the story of the Argentine external debt: 1976/82 about 70 billion, 1990/2011 another 90 billion, 2017/21 another 70 billion and the same since Milei got into power. It was always used to

intervening in the exchange rate.​

Why? What do they gain out of it? Political clout for their party? Riding the bicicleta financiera? Graft and embezzlement?

Or are they sincerely fumbling around trying to save the peso by drowning it in debt with topical band-aids?

 

[Quilombo]

I have my own theory that Argentina is a stain on the IMF's public image. It knows that Milei is on board with the austerity they need for their cookie cutter "economic recovery program". They are willing to posture and telegraph support for Milei to win him future elections (and continue the program), but the truth is that the 20 billion is just refinancing old IMF debt. There's no magic public works, employment program, new export sector, etc. investment coming from these funds. It's just more austerity for more time and more tinkering with various tax and import/export restriction levers to see if an "economic recovery" eventually manifests.

If it didn't work the first time, double down for longer.

I agree with this, and it also reminds me of the saying "If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's their problem."

At a certain point the money doesn't even matter: it's about maintaining confidence in the neoliberal economic policies the IMF has supported and pushes on debtor nations, and if Argentina fails, it brings in to question the entire grift of upwards wealth transfer.

We all know the BCRA has been manipulating the exchange rate, whether directly or indirectly, but the Caputo's version of plan llegar will end just like Massa's did, at some point the dollars run out and the exchange rate has to return to reality. Every day I see the Mileistas getting increasingly vocal, screaming there is no exchange rate lag, yet Argentina once again has been classified by MSCI as a "standalone market" because the cepo remains and there is no market confidence in the longevity of the exchange rate. Just look at the TNA for loans, around 100%, vs. the BCRA's TAMAR, 34.25% which is a giant red flag: yes, Argentine banks are generally usurious, but this means they think there's too much risk in terms of either an exchange rate correction, return to high inflation, or collapse in incomes.

The entire economy here is like watching people shift seats on the deck of the titanic; nothing will matter once the iceberg of reality is struck, and everyone has to accept that the billions of dollars pissed away to keep the peso overvalued are gone and we have nothing to show for it except even more debt.

 

[FrankPintor]

I was going to say, if you want to see trickle down Vaca Muerta money, come on by for a haircut in Neuquen - only $27,000.

Ouch! I pay $16,000 every two weeks (after which time I look like a castaway) for my beard and hair trim at home.

 

[LuckyLuke]

I agree with this, and it also reminds me of the saying "If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's their problem."
Just look at the TNA for loans, around 100%, vs. the BCRA's TAMAR, 34.25% which is a giant red flag: yes, Argentine banks are generally usurious, but this means they think there's too much risk in terms of either an exchange rate correction, return to high inflation, or collapse in incomes.

This is such an astute observation and IMO is one of the obvious reasons that reduced inflation hasn't translated into a recovery. Banks by now should be finally breathing a sigh of relief and offering low interest loans, mortgages, car financing, etc. knowing that salaries and exchange rates are finally stable. Instead, they are still offering the same short term typical predatory loans as usual.