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

[Quilombo]

This whole situation is like watching a train slowly derail with the Mileistas in the proverbial caboose keep screaming "Full steam ahead!" because they can't see the effect up track/everything is fine from their POV.

The cars upfront have completely come off the rails (price of meat/vegetables/drinks/health insurance/electronics "made" in Argentina/etc.) and now we're just waiting for cars holding the dollar and inflation near the caboose to realize something is wrong and come off the rails too.

Caputo and Milei keep saying the fundamentals are strong/nothing is going to change/no devaluation, etc. yet this only works for as long as there are dollars to burn. The IMF might be willing to foolishly give more dollars to Argentina, but almost a year and a half in to this libertarian scam the BCRA's net reserves are negative, the government has to intervene basically everyday in the MEP/CCL market to tame the dollar pissing away a cost equal to that of rebuilding Bahia Blanca, and foreign businesses continue to refuse to invest in Argentina because the peso is behind and there's no way to repatriate their ganes.

Again, I admit "I don't see it" because I can do basic math: but how is this ponzi scheme supposed to work? If the BCRA reserves stay negative despite chainsawing everything, if growth is week, if consumption is flat, if inflation remains 30% a year, tax revenue falls, etc. how is Argentina supposed to payback the loans it's taking? They're literally using the IMF money to keep the peso artificially overvalued with nothing to show for it because Brazil sells the same soybeans and meat for cheaper thanks to a Real that is in line with reality.

How does this end in any way other than a 30% devaluation on Monday, October 27th?

 

[Redpossum]

This whole situation is like watching a train slowly derail with the Mileistas in the proverbial caboose keep screaming "Full steam ahead!" because they can't see the effect up track/everything is fine from their POV.

The cars upfront have completely come off the rails (price of meat/vegetables/drinks/health insurance/electronics "made" in Argentina/etc.) and now we're just waiting for cars holding the dollar and inflation near the caboose to realize something is wrong and come off the rails too.

Caputo and Milei keep saying the fundamentals are strong/nothing is going to change/no devaluation, etc. yet this only works for as long as there are dollars to burn. The IMF might be willing to foolishly give more dollars to Argentina, but almost a year and a half in to this libertarian scam the BCRA's net reserves are negative, the government has to intervene basically everyday in the MEP/CCL market to tame the dollar pissing away a cost equal to that of rebuilding Bahia Blanca, and foreign businesses continue to refuse to invest in Argentina because the peso is behind and there's no way to repatriate their ganes.

Again, I admit "I don't see it" because I can do basic math: but how is this ponzi scheme supposed to work? If the BCRA reserves stay negative despite chainsawing everything, if growth is week, if consumption is flat, if inflation remains 30% a year, tax revenue falls, etc. how is Argentina supposed to payback the loans it's taking? They're literally using the IMF money to keep the peso artificially overvalued with nothing to show for it because Brazil sells the same soybeans and meat for cheaper thanks to a Real that is in line with reality.

How does this end in any way other than a 30% devaluation on Monday, October 27th?

The train is a colorful analogy, and one which bears a large measure of truth.

The question about the IMF is harder to answer. The question you ask about how can Argentina ever repay the debt then begs another question, what is the IMF really about? Why do they exist, and what is their raison d'etre? Are they about being repaid, or are they about control of a nation's economy? And that's a deep, deep rabbit hole.

On a more pragmatic vein, it comes down to this - will the US government push the IMF to loan Milei more, for ideological reasons, or will it not? The US recently banned Cristina from traveling to the USA, which would seem to indicate hostility toward Peronism, and perhaps they will push the IMF toward generosity with Milei for that reason. Or maybe not.

Certainly they pushed the IMF to loan Macri far, far more money than the IMF's own rules allowed, and Macri spent the last two years of his presidency doing exactly the same nonsense of selling dollars to suppress the exchange rate. And there was massive capital flight, although IMF rules clearly state that money shall not be loaned when it would cause or contribute to capital flight.

All we can do is wait and see.

 

[chris]

I wouldn't classify it as "insane", but it's certainly not a discount or a good deal for a high end meal compared to other places around the world. I co own a high end steak restaurant in an expensive area of the USA and we serve imported grass fed Argentine beef. A rib eye is $47 and a skirt steak is $38, with two side dishes (Mirasol is a la carte of course ) plus sales tax and an expected 20% tip. Both cuts of the exported Argentine beef I serve are superior to what was served at Mirasol last night (not a surprise since in general all the best beef in Argentina is exported).

What is your restaurant called and where is it?

 

[Redpossum]

Blue dollar closed today at 1310

 

[LuckyLuke]

Everything hinges on the IMF agreement. The BCRA is burning budget surplus maintaining the 10-15% dirty float, but at the expense of future expiring debt. The IMF says the funds can't be used to prop the peso. Milei says the IMF funds will be used to prevent volatility in the exchange rate within an acceptable range. One of these two is lying.

 

[cayayine]

I believe some economists are speculating about either a collapse, or a major devaluation in the run up to removing the CEPO. That would make the country more competitive internationally, but would have a negative impact on anyone earning in Pesos, since prices would probably go up.

On the other hand, with the situation we have, Argentina cannot produce products competitively, and if imports recover, they will decimate industry and agriculture here, people with money to spend are spending it outside Argentina, and nobody in their right mind would invest in Argentina right now.

Maybe it's time for Argentina to be forced to compete with imports because otherwise the quality of theiir goods will always be low. Right now they have no reason to improve quality since Argies are forced to buy them anyway. Their profit margins must be massive. People deserve better.

 

[Redpossum]

Maybe it's time for Argentina to be forced to compete with imports because otherwise the quality of theiir goods will always be low. Right now they have no reason to improve quality since Argies are forced to buy them anyway. Their profit margins must be massive. People deserve better.

This has been mentioned before, but if they can afford to offer a 30% discount for using a certain method of payment on a certain day of the week, then yes, their profit margins are massive.

And I do wholeheartedly agree that people deserve better.

 

[LuckyLuke]

This has been mentioned before, but if they can afford to offer a 30% discount for using a certain method of payment on a certain day of the week, then yes, their profit margins are massive.

And I do wholeheartedly agree that people deserve better.

I think the whole discount thing is a little more complicated than that. My guess is something like ABC grocer has a revolving line of credit with Banco Gagarte that is soon due for payment. The bank charges 25% for balances carried over the due date.

ABC Grocer sales via Visa/MC take 30 days to hit their operating account and they don't have enough incoming to pay for the upcoming due date. So ABC Grocer offers any purchases through Banco Cagarte get a 25% discount so they can satisfy the line of credit. It's not a loss or gain for the Grocer.

 

[antipodean]

This has been mentioned before, but if they can afford to offer a 30% discount for using a certain method of payment on a certain day of the week, then yes, their profit margins are massive.

And I do wholeheartedly agree that people deserve better.

Also remember that in most cases there is a "tope" to the 30% discount (e.g. AR$30.000 per month, per card) meaning the discount applied across the consumers total monthly spend is often far less than the headline that gets them in the door, and when placing further limits on it like a certain day of the week the total discounts applied over the month vs all transactions is far, far smaller than it may seem. A lot of smoke and mirrors as for every "winner" there are far more "losers" by design, but yes margins in Argentina are often, but not always, far higher than elsewhere simply because of the risks businesses need to take to do business (which is what a margin exists for... "no risk, no reward").

Also, and not a minor point, the discount is usually split two or three ways between the bank, payment channel and retailer as there are a lot of monthly commissions involved for retailers with high volume transactions.

 

[chris]

Maybe it's time for Argentina to be forced to compete with imports because otherwise the quality of theiir goods will always be low. Right now they have no reason to improve quality since Argies are forced to buy them anyway. Their profit margins must be massive. People deserve better

Where is the free market capitalism we were promised?