Dollar Value Predictions 2021/2022

[jblaze5779]

Do you suspect that the ball will be released after the elections (is this the main driver for the intervention)? What pressures to maintain inflation will be the next most important?

 

[Alpinista]

Do you suspect that the ball will be released after the elections (is this the main driver for the intervention)? What pressures to maintain inflation will be the next most important?

Yes, I believe the main driver behind these interventions is to combat the inflation. Officially the goal for this year is 29% (and Guzman a month ago said ago that this is still realistic, even though the majority of the economists were projecting at least 50-60% at the beginning of the year). Now at the end of April there is already an accumulated inflation of circa 18-20%, so it is clear that the inflation is nowhere near where it should be according to the government. And historically it was always almost impossible to win elections with inflation rates above 50%.

The other measures to contain the inflation are the price controls, very low tariffs for gas / electricity and try to park the excess money in short-term peso bonds (Leliqs).

But with the printing machine running at full capacity and the gap between the natural / market value and the artificially low peso value ever increasing, the harder it is to contain the CCL / blue. So it will be interesting to see whether they can keep this boiling pot under control until the elections.

 

[jblaze5779]

Yeah I get the importance of containing inflation and its impact on poverty and many other parts of Argentina. You can see the inflationary goals for the year are probably not achievable.

With price controls it will be impossible for anyone to make profits to produce goods and food, so why would they do it?

It's not sustainable. What is the next step? Hyperinflation? Is Venezuela a good example to look to? (maybe not VZ conditions this year but over time?)

 

[¡Sencillamente yo!]

Yeah I get the importance of containing inflation and its impact on poverty and many other parts of Argentina. You can see the inflationary goals for the year are probably not achievable.

With price controls it will be impossible for anyone to make profits to produce goods and food, so why would they do it?

It's not sustainable. What is the next step? Hyperinflation? Is Venezuela a good example to look to? (maybe not VZ conditions this year but over time?)

I don''t think price controls are a viable solution because when they are removed, there should be a giant pop higher. Unless price controls are removed gradually. And if they are, the pop higher is controlled, but it should still occur.

Tough situation to get out of, from a governing perspective. Glad I am not Gúzman.

 

[on the brink]

What have you been investing in? 8% over inflation is pretty good!

In US index funds - SP500 and such. That is the average over the past twenty years.

 

[Dougie]

The dollar has now declined 30% against the Argentine peso. As Donald said would happen if the Democrats won the White House and Congress.

All of you guys are wrong. Jerbo reports that fluctuations in the USD to Peso has to do with the Democrats being in control of the White House and Congress.

It seems now Argentines are warming up to Joe Biden and buying dollars again.

 

[Dougie]

In US index funds - SP500 and such. That is the average over the past twenty years.

8% over inflation which is say anywhere from 2 to 7% per year. So you're looking at 10 to 15 % a year.

 

[Ries]

In US index funds - SP500 and such. That is the average over the past twenty years.

How exactly does an argentine with, say, 150,000 pesos in cash, and no overseas credit card or bank account invest in US index funds? And what would the Argentine tax rate on this if you did it legally?

 

[Alpinista]

I don''t think price controls are a viable solution because when they are removed, there should be a giant pop higher. Unless price controls are removed gradually. And if they are, the pop higher is controlled, but it should still occur.

Tough situation to get out of, from a governing perspective. Glad I am not Gúzman.

Every measure that is being taken to combat inflation comes at a cost:
Cepo / low official FX rate: exporters here in Argentina don't receive the "real" market value for their goods produced here. So this has a negative impact on the investments and job opportunities here (fair to say that without the cepo the domestic production - especiall in agriculture - would be much higher). The importers are also better off compared to local producers as long as they are allowed to import at the official rate. Also in some cases not enough imports are approved with negative consequences on the supply chain (and local production).
Price controls (in supermarkets etc): Producers either drop out of market (less competition, which in tendency leads to higher prices) or simply produce less. You will also note more empty shelves in the supermarket as a result of this.
Freezes on tariffs: if the providers are state companies, then the state deficit increases correspondingly. If they are private companies they might retreat from the Argentinian market. In either case there is a low (or no) incentive to put money into the infrastructure. That also then explains partially the frequent power cuts we face here.

In short: whatever you do to combat the inflation might work in the short term, but it comes at a (high) cost and with little or no effect on the mid and long term. The only thing that really works to bring the inflation down is to reduce public deficit and stop printing money). The problem with the latter is that current government does not see it that way; but even they did, it would be extremely difficult to implement this cuts.

 

[Alpinista]

How exactly does an argentine with, say, 150,000 pesos in cash, and no overseas credit card or bank account invest in US index funds? And what would the Argentine tax rate on this if you did it legally?

I am yet to meet an Argentine who would care about tax compliance and legality in such a matter.