Do you fear a crash similar to 2001?

[Churchill]

If Argentina can see out the storm and returns to growth then it can easily, easily pay back its debts.

 

[MikeB12]

I wouldn't expect the general population to have an educated opinion on sovereign default risk. The majority of people who put money on the line making these bets, don't see a high probability of it happening. Of course they could be wrong, and have been wrong before.

I ask you how does Argentina pay back its 250 billion dollars in foreign debt but only has 55 billions in foreign reserves and a economy in recession ?

I don't have all the numbers so I can't answer your question accurately, but I'll make assumptions. The 250B isn't all going to mature in the next couple years. Their 55B in reserves isn't a static number and could increase if growth returns. If investors see improvements...structural, tax, inflation, etc that would indicate a foundation for a better economy and investors would loan more money to government and they could use that loan to pay off the loans that are coming due.

 

[perry]

I wouldn't expect the general population to have an educated opinion on sovereign default risk. The majority of people who put money on the line making these bets, don't see a high probability of it happening. Of course they could be wrong, and have been wrong before.



I don't have all the numbers so I can't answer your question accurately, but I'll make assumptions. The 250B isn't all going to mature in the next couple years. Their 55B in reserves isn't a static number and could increase if growth returns. If investors see improvements...structural, tax, inflation, etc that would indicate a foundation for a better economy and investors would loan more money to government and they could use that loan to pay off the loans that are coming due.

The reserves are drastically decreasing and Argentina is in recession . If they could not prosper with 250 billion dollars of created money how can the maintain a economy with just 55 billion dollars of reserves with huge debt obligations coming due?

There is no money to be lent to Argentina no more bonds to be created from nothing . The last resort was the IMF and this gamble has now been played . Greece in a similar situation has had 8 years of severe recession but their saving grace is that they have the euro that keeps their standard of living stable if not peoples wages would have collapsed if they returned to the drachma .

The argentinian peso is what the central bank prints and this currency is completely dependent on market forces . The peso has devalued 65 percent just in 2018 and we are just in the early stages of a recession . Project this two years from now where will the peso be then . I will put a bet that a 100 pesos per dollar could be a reality for Argentina and with this a depression that will make 2001 a walk in the park.

I wish I could be positive as I sincerely love Argentina with all my spirit but I am a realist and see that that there is no way out of this and it is my duty to warn others of the inherent dangers that are coming for us all . Crashes do not come with a email from the Government they happen with warning signs but most people are never prepared.

 

[Churchill]

How sure are you? Forex, stocks, bonds, many options open for you to make a massive amount of money if you are indeed right.

 

[MikeB12]

Perry,

You may be proven right, let's hope not

 

[julian63]

I've breezed through this thread and can share some observations based upon my experiences here. What I know about economics would echo in a thimble, but I suspect the same is true of many who post here so I'm not terribly disadvantaged

I first arrived in Bs As in in May/1975 and stayed until Jan/76. Isabelita was President. From the time of my arrival to the coup led by Videla in March/76, the rate of exchange for the peso went from about 40 per USD to 400. By then I was safely back in the US on the way to becoming a Legal Aid lawyer in San Francisco. Fast forward 30 years...I bought an apt in Recoleta in 2008 and visit periodically.

The circumstances that caused the hyperinflation of the mid 70s appear to be different than those that caused the hyperinflation that occurred under Alfonsin in the late 80s and under de la Rua in the late 90s. Nevertheless, hyperinflation occurred in all 3 decades. The current weakening of the peso is nothing compared to what occurred during the aforementioned periods. It would be foolish to think the hyperinflation of earlier decades could not occur again. If anything, it appears to be overdue.

Because of my admitted ignorance on matters macro-economic, I can't pinpoint the cause of this phenomenon, but I can suggest one element that possibly adds fuel to the inflationary fires - it is the burden placed upon private enterprise by antiquated labor and tax laws. I consider myself a progressive on the political scale and do support unions, but the balance of power tilted too strongly toward labor under Peron and has never fully been corrected. This breeds labor law non-compliance and tax evasion (hiring those who can work in negro who themselves evade tax) which, in turn, leads to both an unfair hardship imposed on those who have to pay higher taxes and to a general disrespect for the law and government. (Case in point; the portero in my building is a grossly incompetent, lazy slacker whom we also suspect of dishonesty, but to discharge him means a protracted battle with his union and a large undeserved lump sum payment.)

In deed, to this US lawyer, disrespect for the law appears to be a national character trait. Disrespect for the law also breeds disrespect for the other. Going one step further, perhaps this explains the prevalence of horribly inconsiderate drivers and dog owners that don't bother to pick up after their pets. I find even walking on the city sidewalks can be more challenging here because of apparent indifference towards the other by pedestrians.

Aside to bajo cero; I have no solution for the problems that ail the Arg economy, However, it seems to me that if diminishing taxes on mining and farming operations/exports stimulates employment and a better trade balance, that would be a good thing if not carried out to excess. Also spending on social programs abused by immigrants - of any ethnicity - has to be carefully managed.

 

[Bajo_cero2]

Aside to bajo cero; I have no solution for the problems that ail the Arg economy, However, it seems to me that if diminishing taxes on mining and farming operations/exports stimulates employment and a better trade balance, that would be a good thing if not carried out to excess. Also spending on social programs abused by immigrants - of any ethnicity - has to be carefully managed.

The fiscal imbalance is because he abolished taxes to minning and reduced them to farming.
Today he forgave 70 million usd to Perez Companc company regarding avoiding taxes. The only thing he stimulates is white collard crimes.
https://www.diarioregistrado.com/po...millones-de-dolares_a5b85aa5c9895722841a4f9a8
Did you know that the Maxri familly become tycons taking loans in usd that they never paid because the last dictatorship made it state debt?

So, to compensate the taxes he abolished he took loans.
They also abolished regulation about capital flights and they kept the usd too cheap for 18 months. To complete the bomb they skyrocketed the cost of services they own, so they got more pesos for buying cheap usd to send them abroad. So, how an economy cannot collapse?

When the economy collapses, he is going to make public the private debt of his companies.

 

[julian63]

The fiscal imbalance is because he abolished taxes to minning and reduced them to farming.
Today he forgave 70 million usd to Perez Companc company regarding avoiding taxes. The only thing he stimulates is white collard crimes.
https://www.diarioregistrado.com/po...millones-de-dolares_a5b85aa5c9895722841a4f9a8
Did you know that the Maxri familly become tycons taking loans in usd that they never paid because the last dictatorship made it state debt?

So, to compensate the taxes he abolished he took loans.
They also abolished regulation about capital flights and they kept the usd too cheap for 18 months. To complete the bomb they skyrocketed the cost of services they own, so they got more pesos for buying cheap usd to send them abroad. So, how an economy cannot collapse?

When the economy collapses, he is going to make public the private debt of his companies.

I used google translate for your linked newspaper piece. I didn't read it to state exactly what you have said. The drift of it from what I could comprehend is that in 2007 the prior administration applied a newly enacted tax provision retroactively to the Molinos company. The company filed a lawsuit to determine the correctness of the application retroactively. The suit was still pending so the correctness of the tax was as yet undetermined. It had been dragging on for over 10 years. Macri ordered the Agriculture Ministry to revoke the retroactive application of the tax effectively allowing Molinos to prevail in its lawsuit.
I have no idea whether Molinos would have prevailed, but to say Macri forgave 70MM in taxes is not quite accurate inasmuch as it had not yet been determined (after 10 years in court ?) that the imposition of that tax debt was valid. Am I wrong? I ask because I am reluctant to make assertions that a participating poster has misrepresented the facts just to "win" an argument. That is because I do not want to lose credibility. I am sure you are of the same mind, right?
p.s. I applaud your ability to write in a second language, but I have difficulty comprehending exactly what you say. Who is the "them" that you say bought artificially low cost USD to send abroad? The Macri family business, the government itself, or those in the government. Who exactly?

 

[Bajo_cero2]

With all my respect, besides your good faith there is an important lack of basic knowledge of history of this country and how its corruption works.
FYI the art. 99 of the NC forbidds the President to get involved in lawsuits like he did “helping” this company. This is corruption.
I suggest you google “estatizacion de la deuda publica” plus Macri plus Perez Companc because they made their fortune in this way several times already.
If you do not even understand how does capital flights works in a country that lacks usd, we are loosing the time here.

 

[julian63]

I stand corrected. I have no knowledge of art 99 nor what it forbids, however, according to the text of one of the google searches you suggested
( https://www.apertura.com/negocios/M...-reclamo-de-us-70-millones-20180827-0007.html ) if I am reading it correctly, the 70 MM tax has not been removed. Macri's decree only permitted the company's appeal of that tax assessment to continue to be processed by the appellate court (where it has apparently been mired for 10 years).
It seems to me you should have known this. Did you? Instead of defining the economic policy of decreasing taxes on mining and farming entities as corruption per se or making other unspecified charges of corruption, would you please address this specific Molinos tax issue? You said above that "Macri forgave 70MM [the tax]." That is not accurate, is it? Further, if art 99 disallows the president to do what he did, i.e., to allow the court process to proceed, presumably the courts will rule on that.
Could you address my other question above regarding the identity of the "them" that purchased USD at an artificially low price?

p.s. USD up 6% today to 35.