Does anyone else feel there might be a peso collapse this year?

[Redpossum]

Milanesa sandwich at my local bakery was 5000 pesos two months ago. Now it's 7000 pesos. I make that about 20% inflation per month. Granted, it's a big sandwich, very fresh and loaded with goodies, but still.

Back when it was 3000, I would occasionally treat myself, but it's waaaaaay out of my budget these days.

In any case, things like this are my gauge of real inflation, not some numbers on a spreadsheet, and sure as hell not the lies published by any government, be it USA, Argentina, or whatever.

 

[Che1990]

Prices are utterly ridiculous right now, but I don’t think a peso collapse will happen this year as there are elections.

Milei has negotiated an IMF loan to keep paying for the artificial exchange rate.

I did have faith in Milei as I do believe in the free market, but he is using the same tactics used by previous administrations. All ended up failing spectacularly.

Caputo was Macri’s finance minister and is the doing the same tricks that failed back in 2017/18.

It also seems like the basic rules of capitalism just don’t work in Argentina.

Elsewhere, if people stop consuming, prices come down. Here they go up.

Elsewhere, if your competitor launches lower prices, you lower yours to compete. Here that doesn’t happen. Just search for a product on Mercado Libre and you’ll see huge price disparity.

Elsewhere, pro-market reforms happen and business embrace them. Here no. For example, any business here can now sell non-prescription medicine. But do you see supermarkets here selling paracetamol etc like they do elsewhere in the world? No.

It’s not just the politics, it’s society. It requires a change in mentality and I just dont think culturally it will.

The culture of wanting to charging the highest price and keep putting up prices I don’t think will ever change.

 

[Ries]

Milanesa sandwich at my local bakery was 5000 pesos two months ago. Now it's 7000 pesos. I make that about 20% inflation per month. Granted, it's a big sandwich, very fresh and loaded with goodies, but still.

Back when it was 3000, I would occasionally treat myself, but it's waaaaaay out of my budget these days.

In any case, things like this are my gauge of real inflation, not some numbers on a spreadsheet, and sure as hell not the lies published by any government, be it USA, Argentina, or whatever.

all sandwiches are that much now. 3 migas are over 5000 at the cheap places now.
But some things havent gone up anywhere near as much.
In February, some kioscos were selling monster energy drinks for 3000 and a can of coke for 2000.
Today, monster is 3000, sometimes 2500, and a can of coke is 2000.
so- some things are 100% up, others, not up at all...
But food, in general is way up.

 

[Ronnie Hotdogs]

Far too difficult for me to understand but it does seem like there is a bit of a bubble from blanqueo + carry trade, when traders want to get their money back in USD will result in pressure on the peso.

When this happens who knows?

 

[daveholman]

It also seems like the basic rules of capitalism just don’t work in Argentina.

Elsewhere, if people stop consuming, prices come down. Here they go up.

Elsewhere, if your competitor launches lower prices, you lower yours to compete. Here that doesn’t happen. Just search for a product on Mercado Libre and you’ll see huge price disparity.

Elsewhere, pro-market reforms happen and business embrace them. Here no. For example, any business here can now sell non-prescription medicine. But do you see supermarkets here selling paracetamol etc like they do elsewhere in the world? No.

It’s not just the politics, it’s society. It requires a change in mentality and I just dont think culturally it will.

The culture of wanting to charging the highest price and keep putting up prices I don’t think will ever change.

There is a lot of truth to that. Free market capitalism requires a certain mind set. I think Argentina has been so whiplashed by instability they no longer trust any change will be long term, so they just keep doing what they've always done. And consumers don't demand change (at least in sufficient numbers).
As much as we in the US complain about our government (50% are always mad at whoever is currently in charge), it actually swings back and forth in a very narrow range, so we all think if things aren't great now, they will be soon.

 

[LuckyLuke]

It also seems like the basic rules of capitalism just don’t work in Argentina.

Elsewhere, if people stop consuming, prices come down. Here they go up.

Elsewhere, if your competitor launches lower prices, you lower yours to compete. Here that doesn’t happen. Just search for a product on Mercado Libre and you’ll see huge price disparity.

Elsewhere, pro-market reforms happen and business embrace them. Here no. For example, any business here can now sell non-prescription medicine. But do you see supermarkets here selling paracetamol etc like they do elsewhere in the world? No.

It’s not just the politics, it’s society. It requires a change in mentality and I just dont think culturally it will.

The culture of wanting to charging the highest price and keep putting up prices I don’t think will ever change.

I've often wondered about this same effect. Rather than thin their margins by reducing prices to make up with sales volume, they seem to prefer cutting production output and increasing the price instead to attempt to maintain not only margins but profits too. I have seen this same effect in the US but only with boutique niche products that prefer being "limited" so as to avoid being associated as "mass produced".

US Airlines have been known to employ this same tactic. Rather than allowing last minute empty seats to be sold at discount, they price in the flight route occupancy percentage into the general seat rate. This avoids diluting their margins and giving consumers an upper hand at negotiating rates.

It's nevertheless a strange phenomenon here that I wonder if it has something to do with employment laws, or output quotas. An industry insider would help shine some light on it. Some users have posted in the past that due to the lack of financing down here, business owners in general tend to own their shops, hire family members, and don't pay for inventory using lines of credit. US businesses hemorrhage cash rapidly while sitting on idle inventory due to high operational costs and inventory loan repayment terms, whereas Argentines are reluctant to part ways with idle inventory, often seen as a form of "wealth".

 

[jorisw]

> What has happened after previous cases of peso overvaluation? Just in the last 15 years, periods of overvaluation above 25 percent (in GDP-adjusted terms) have been followed by a crash in the Argentine currency, with a swing of at least 45 percent and as much as 117 percent toward peak devaluation. Granted, past conditions were not the same as today’s, especially in terms of the Milei government’s strict fiscal stance and, more recently, its zero-emission monetary policy. But, at the very least, historical precedent should give room for thought.

From https://www.cato.org/blog/mileis-key-pending-task-ending-argentinas-currency-controls-part-ii


> Rapetti said that the government would “most likely” be able to sustain its current foreign exchange policy in 2025, after a recent tax amnesty led to an influx of dollars into the economy, but that it was “highly improbable” that Argentina could support such an expensive peso beyond next year.

From https://www.ft.com/content/cdcdbf7b-6c88-4ca7-94c0-3628e3ac7e56?sharetype=blocked


> Yet the resulting peso strength has some economists worried. Argentina’s history for most of the past century has been a loop of booms followed by inevitable busts: A few good years when the peso tended to appreciate by capital inflows would give way to a loss of competitiveness, manufacturing layoffs and a widening current account deficit. Capital flows would reverse once investors lost confidence in the country’s capacity to finance those imbalances, in turn prompting a sharp depreciation of the currency, more inflation and political instability

From https://www.livemint.com/companies/...-threatened-by-7-big-macs-11734606528445.html

 

[Ries]

In the last 17 years, I have seen prices relative to dollars go up, and go down. I have not seen a "crash", nor have I seen prices in pesos go down. I cant imagine we will see peso prices fall. Instead, we can only hope incomes will go up, which is what has happened in the past.

 

[jorisw]

> It’s not just the politics, it’s society. It requires a change in mentality and I just dont think culturally it will.

I wonder about this too. Is the 'healthy and prosperous' economy that Milei wants, supported culturally?
Or is he envisioning an economy that is simply too much to ask?

I'm reminded of the EU and Greece. In order for Greece to receive help from the EU in order to prevent a national default, draconic measures were demanded that simply didn't match the culture over there, and led to Greeks forever hating those in charge of the Euro zone. Similar fates loomed for Spain and Portugal and still do. To simplify-to-clarify: the Greeks just weren't used to working this hard (or as much perhaps) and paying the kinds of taxes (and other financial and fiscal discipline) that people in North-Western Europe were used to.

 

[Ries]

Austerity was a failure in Greece. It caused a bigger depression, and took longer for the economy to bounce back, as opposed to other european countries which instead, came back quicker. In general, austerity, as an economic solution, has failed to work. Its a classic case of ideology insisting on "punishing" the poor.