Dollar Purchase Restrictions May Be Lifted In June

[Jaredberryman]

Not an economist, so wouldn't know what to suggest.
How did Brazil manage to get the Real to become THE currency of that country? As opposed to the USD, I mean.
Surely here, we need one thing or the other which is why everything is such a mess?

Brazil has a lot of the problems that Argentina has with dollars. Try buying dollars or getting your money out of Brazil, and it's the same deal. I really don't think the situations are that drastically different.

 

[ARbound]

Brazil has a lot of the problems that Argentina has with dollars. Try buying dollars or getting your money out of Brazil, and it's the same deal. I really don't think the situations are that drastically different.

There is a Real Blue rate here. That makes the situations different.

 

[Jaredberryman]

There is a Real Blue rate here. That makes the situations different.

Of course it's different. But they still have to pay foreign debts and get energy in dollars. The countries are not the same and their situations differ. But there are some major points of contact.

 

[thorsten]

Tex, I think the situation in Brazil nowadays differs quite a lot to the one here: yes, both countries have certain restrictions regarding the access of foreign currencies. However, the main difference is that the central bank in Brazil does not try to keep the Real way under its market rate, while Argentina does, which basically leads to a parallel market. So in that regard, Argentina is more similar to Venezuela, where you can see it in a way more extreme form.

 

[germano]

The answer to your question is: context. The Blue market accounts for 5-10%of dollar transactions (5 according to Indec, 10 according to private consultancies). We seem to lose sight of that because this forum is practically the epicentre of the blue market, but in the overall context of the Argentine economy, it's not a huge thing.

Furthermore, in spite of CFK's silly rhetorical flourishes, the govt's monetary policy has always been in favour of devaluation, but aiming at slow gradual devaluation instead of huge spikes.

But still: up to 10% of the dollar transactions that they lose to the black market. And does that number include the "contado con liqui" etc? Even if you ignore the black market and contado con liqui - for me - it still makes no sense to keep the value of the peso artificially high. Argentine exports are more expensive abroad then they would be with the exchange rate around the contado con liqui rate. Imports, travel abroad etc. are cheaper then they would be with the real value of the peso - so they have to implement all those extra imports restrictions, tariffs, taxes on travel etc.

 

[sleazemerchant]

Brazil has a lot of the problems that Argentina has with dollars. Try buying dollars or getting your money out of Brazil, and it's the same deal. I really don't think the situations are that drastically different.

This is completely false. The Banco Central do Brasil has $362 BILLION USD in foreign currency reserves whereas Argentina has less than $27 BILLION USD in foreign currency reserves. Anything can be imported into Brasil in unlimited quantities as long as the hefty import tariffs are paid. In addition any person or business entity can exchange Reais for any foreign currency up to ANY amount provided they can produce documentation as to the origin of the funds when dealing in large amounts. By law, all commercial transactions conducted within Brasil must be done in Reais (including real estate).

Currently Brasil has more USD reserves than they know what to do with and they can (and do) obtain basically unlimited financing in international debt markets at between 4-4.5% APR. Their credit rating was just cut to BBB- by S&P (The lowest investment grade rating; Uruguay has the same BBB- rating and last year issued several billion USD in debt at 4.5% and it was massively oversubscribed and currently sells for 4 points over par in anticipation of a credit rating increase by S&P). Totally incomparable with Argentina, who has pissed away half their USD BCRA reserves over the past several years and could not even dream of selling foreign currency debt in international markets at anything less than 10%.