How far will the downturn be in Argetina?

criswkh

Registered
Stan-I think Argentina could be the Brazil of South America. It has lots of assets both in it's people and resources. The only thing holding it back is governments like they currently have. Hopefully the people will wake up one day and demand better governance.
Does that mean you have hope for Argentina? California is doing IOU and so is some smaller towns in the South of the US.
 

Stanexpat

Registered
criswkh said:
Stan-I think Argentina could be the Brazil of South America. It has lots of assets both in it's people and resources. The only thing holding it back is governments like they currently have. Hopefully the people will wake up one day and demand better governance.
Does that mean you have hope for Argentina? California is doing IOU and so is some smaller towns in the South of the US.
Sure I have hope for Argentina, the main problems there are not economic, they are political. There is no reason Argentina economically shouldn't be a wealthy and successful country.

I think all this talk about a breakup in the U.S. mainly from obscure Russians of dubious merit is just silly. California issuing IOU's is not creating another currency. California needs to get it's financial house in order. This has been going on for a long time. This was a problem several years ago under the former governor. I believe Arnold was elected to fix the problem.
Seems like they will have to make some hard decisions soon.
 

bigbadwolf

Registered
steveinbsas said:
The coming summer riots...
Looks like rioting and demos will be worldwide and will turn increasingly violent. An article in Asia Times:

Indeed, if you want to be grimly impressed, hang a world map on your wall and start inserting red pins where violent episodes have already occurred. Athens (Greece), Longnan (China), Port-au-Prince (Haiti), Riga (Latvia), Santa Cruz (Bolivia), Sofia (Bulgaria), Vilnius (Lithuania), and Vladivostok (Russia) would be a start. Many other cities from Reykjavik, Paris, Rome, and Zaragoza to Moscow and Dublin have witnessed huge protests over rising unemployment and falling wages that remained orderly thanks in part to the presence of vast numbers of riot police. If you inserted orange pins at these locations - none as yet in the United States - your map would already look aflame with activity. And if you're a gambling man or woman, it's a safe bet that this map will soon be far better populated with red and orange pins.
And the fun part starts when:

For the most part, such upheavals, even when violent, are likely to remain localized in nature, and disorganized enough that government forces will be able to bring them under control within days or weeks, even if - as with Athens for six days last December - urban paralysis sets in due to rioting, tear gas, and police cordons. That, at least, has been the case so far. It is entirely possible, however, that, as the economic crisis worsens, some of these incidents will metastasize into far more intense and long-lasting events: armed rebellions, military takeovers, civil conflicts, even economically fueled wars between states.
 

steveinbsas

Registered
Stanexpat said:
I think all this talk about a breakup in the U.S. mainly from obscure Russians of dubious merit is just silly.
Of course it' silly. I love to laugh at idiots, except when they have political power.

I think you all know who I mean.
 

lbaron

Registered
bigbadwolf said:
There's also a rumor in the blogosphere -- purportedly based on a recent Russian foreign ministry report -- that the US authorities are bracing themselves for a summer of riots and demos in the USA.

Why would there be riots in the US? Even people who don't pay taxes are getting "tax cuts" that are really welfare checks. If anyone deserves to riot, it should be people who actually pay taxes.
 

Peter2343

Registered
I read recently that some economists here expect the peso to get to perhaps 3.80 to the dollar before/up to election time in October, and then after the election move pretty quickly to 4.0 and probably stay there for awhile. But since this is Argentina, quien sabe?
 

perry

Registered
These are my beliefs about Argentina and will be realised in my lifetime. Many people do not realise that the worlds richest land and also the worlds best water supplies are in Argentina . These two commodities will become the most valuable resource in the years to come potentially making Argentina one of the worlds wealthiest.

I do not know any other country in the world that has the potential of Argentina with so small a population. Also another huge benefit of Buenos Aires and Argentina is the social cohesion of our society . There are no powder kegs waiting to explode like the USA, Europe, and the Soviet Union. Argentina has its class system and poverty issues but it does not have issues due to clashes of civilisation and conflicting cultures trying to share similar values ie, France, Spain, United Kingdom and many other countries.

In regards to Argentinas economy I am optimistic that we will be less affected than most due to our natural wealth and limited exposure to credit markets. Another wildcard is that the world is reaching a very dangerous stage now and there will be more violent wars in the near future . As we are an isolated country from the world stage this will work greatly in our favour in the coming years.
 

wnewman7

Registered
All,
I am an American and work in for a local investment bank here in Buenos Aires and part of my job responsibilities includes gathering macroeconomic research for the entire Latin American region, but especially on Argentina.

The outlook is not good.

A conservative Wall Street Consensus (combiled from reports issued by Goldman Sachs, Merill Lynch, JP Morgan, Deutsche Bank, Credit Suisse, Citi and Santander) puts Argentina at -1.2% growth this year after explosive 7-10% growth annually since 2002. I wrote to this effect a few weeks ago in a post about electricity costs, but the government is in an extremely dire situation as far as being able to cover its costs due to huge spending increases in the last few years. Many of the policies instituted by President K#1 (that have been continued by President K#2) were meant as stimulus items after the crisis of 2001-2002 that were simply never rolled back until recently if at all for fear of losing the support of the electoral base. A few examples of this include the massive subsidies for electricity (5x cheaper per KW/hour than in the US in real dollar terms), public transport (a ride on the Subway in New York is US$3 and here its US$0.30), milk, beef, and the list goes on.

The government payroll has also increased massively in the last few years (especially in the smaller provincial cities), and when combined with the lower world prices for Commodities (Oil -68%, Soy -29%, Wheat -28%, Corn -30%, Copper -50% Source: Economist Intelligence Unit), the drought that could potentially eliminate 40% of the country’s agriculture production, and an ever increasing debt burden due to dollar denominated debt whose interest payments are based on domestic inflation numbers (that’s why INDEC lies about the national inflation), one understands why the private pension funds (AFJPs) were nationalized in October of 2008.

This gave a quick relief to government coffers, but took US$30 billion out of an already miniscule stock market and has destroyed over 50% of the value of nearly every public company in the country while at the same time pushing sovereign debt risk premiums as high as they were in October-November of 2001 (1,707bps over a US treasury bond as of yesterday).

This all leads us to a preoccupation of the government, any anyone else who hopes to keep Argentina at least marginally on the world economic map, which is paying off the foreign debt no matter what the domestic costs are. The government will be able to accomplish this for at least the next 18 months at the expense of the peso. Right now we are at 3.58 pesos / USD, July of last year it was 3.02 / USD, and end of this year it will be over 4 / USD heading towards 5 by the middle of next year. This makes it ever more difficult for the government to meet its dollar denominated debts, the only up side being inflation is expected to go as low as 6% this year after years in the high 20s.

An earlier post talked about how many companies are waiting until the next quarter to announce layoffs and let loose with all of the bad news and I agree. One thing that needs to be taken into account with the current state of affairs in Argentina is that it is still summer vacation. School aged children have not returned to classes, many people are just ending long vacations, they were spending their year end bonuses from last year, and in general the populace is not back in the swing of things after the long holiday. The same thing happened last summer in the Northern Hemisphere.... need I remind you of what happened last September 15th after the world was on vacation for 6 weeks amidst a looming crisis?

All this being rambling is essentially meant to give a basis for my belief that the economy here is currently an 18-wheel truck that is about to slam into a wall within the next 3-4 months. What will things be like on the ground here? I have no idea. I was not around in 2001-2002 (moved here in early 2007) but I doubt it will get that bad. For those of you in this forum that are looking at Argentina for long-term living and employment 2009 will be the true test. If the country makes it to 2Q 2010 without falling to pieces I believe we will be in the clear.... but 2009 will be a very, very bumpy ride.

Cheers.
 

Stanexpat

Registered
wnewman7 said:
All,
I am an American and work in for a local investment bank here in Buenos Aires and part of my job responsibilities includes gathering macroeconomic research for the entire Latin American region, but especially on Argentina.

The outlook is not good.

A conservative Wall Street Consensus (combiled from reports issued by Goldman Sachs, Merill Lynch, JP Morgan, Deutsche Bank, Credit Suisse, Citi and Santander) puts Argentina at -1.2% growth this year after explosive 7-10% growth annually since 2002. I wrote to this effect a few weeks ago in a post about electricity costs, but the government is in an extremely dire situation as far as being able to cover its costs due to huge spending increases in the last few years. Many of the policies instituted by President K#1 (that have been continued by President K#2) were meant as stimulus items after the crisis of 2001-2002 that were simply never rolled back until recently if at all for fear of losing the support of the electoral base. A few examples of this include the massive subsidies for electricity (5x cheaper per KW/hour than in the US in real dollar terms), public transport (a ride on the Subway in New York is US$3 and here its US$0.30), milk, beef, and the list goes on.

The government payroll has also increased massively in the last few years (especially in the smaller provincial cities), and when combined with the lower world prices for Commodities (Oil -68%, Soy -29%, Wheat -28%, Corn -30%, Copper -50% Source: Economist Intelligence Unit), the drought that could potentially eliminate 40% of the country’s agriculture production, and an ever increasing debt burden due to dollar denominated debt whose interest payments are based on domestic inflation numbers (that’s why INDEC lies about the national inflation), one understands why the private pension funds (AFJPs) were nationalized in October of 2008.

This gave a quick relief to government coffers, but took US$30 billion out of an already miniscule stock market and has destroyed over 50% of the value of nearly every public company in the country while at the same time pushing sovereign debt risk premiums as high as they were in October-November of 2001 (1,707bps over a US treasury bond as of yesterday).

This all leads us to a preoccupation of the government, any anyone else who hopes to keep Argentina at least marginally on the world economic map, which is paying off the foreign debt no matter what the domestic costs are. The government will be able to accomplish this for at least the next 18 months at the expense of the peso. Right now we are at 3.58 pesos / USD, July of last year it was 3.02 / USD, and end of this year it will be over 4 / USD heading towards 5 by the middle of next year. This makes it ever more difficult for the government to meet its dollar denominated debts, the only up side being inflation is expected to go as low as 6% this year after years in the high 20s.

An earlier post talked about how many companies are waiting until the next quarter to announce layoffs and let loose with all of the bad news and I agree. One thing that needs to be taken into account with the current state of affairs in Argentina is that it is still summer vacation. School aged children have not returned to classes, many people are just ending long vacations, they were spending their year end bonuses from last year, and in general the populace is not back in the swing of things after the long holiday. The same thing happened last summer in the Northern Hemisphere.... need I remind you of what happened last September 15th after the world was on vacation for 6 weeks amidst a looming crisis?

All this being rambling is essentially meant to give a basis for my belief that the economy here is currently an 18-wheel truck that is about to slam into a wall within the next 3-4 months. What will things be like on the ground here? I have no idea. I was not around in 2001-2002 (moved here in early 2007) but I doubt it will get that bad. For those of you in this forum that are looking at Argentina for long-term living and employment 2009 will be the true test. If the country makes it to 2Q 2010 without falling to pieces I believe we will be in the clear.... but 2009 will be a very, very bumpy ride.

Cheers.
I think you are fairly close to the mark in your post-Thks
 

kersuet

Registered
I still live in the U.S., but have visited BA 3x in the last 3 years and really hoped to move their for a mid-life mini retirement. I think those living in Argentina and many other South American countries get numbed to the fact that these countries are incredibly corrupt at the macro and micro levels. There is a lot of soft corruption in America, but I have been amazed at the corruption in Brazil, Columbia, and Argentina. I thought of buying a business in Brazil, and a close brazilian friend asked me how I had factored bribes into my business plan. Anyway, I think the economic prospects of many South America countries are greatly limited by the lack of trust and integrity which appears to be part of the culture. I think that is one of many reasons why these countries also struggle to gain credit from the global financial market. In any case, trust is a key component of any great economy and that is one factor that is bringing America down because so much of us citizen have lost trust in banks, investment firms, and our politicians. Cheers,
 
Top