How's everyone hanging in there with the cost of living these days?

[ksm76]

There is more here than meets the eye. It was announced not long ago that the $20 billion loan from Bessent was already repaid. There is no currency intervention this very moment in the FX market, in fact the BCRA is actively buying dollars to shore up foreign reserves without running into the unintended risk of the dollar hitting the top of the FX band. This could only be achieved with sufficient agro/import/foreign investment dollars incoming to avoid the BCRA buying too many of the small pool of dollars needed for export/foreign trade contracts..thereby causing a dollar shortage (rising dollar). The BCRA is also now providing "positive" interest rates, which further reduces dollar speculation.

These are the two requirements of the IMF that the BCRA has struggled to meet because of the delicate balance of import/export dollars. IMO, so long as this continues and the BCRA continues to show that there are sufficient dollars to meet national needs and that investing in the peso will yield a greater return, then it could remain stable for some time. There are many factors that could destabilize (foreign debt obligations, speculations, commodity prices, polticial instability, etc.), given the shortage of dollars which is why it's crucial the BCRA continue shoring up it's foreign reserves.

I want to point this out, because I see a lot expats here thinking all of this is artificial intervention. There is an organic part of this too. You have vast sums of dollars under the mattress that are losing to inflation right now. They are being invested, converted to plazo fijo, or sold to pay the rent. This could be a temporary effect, there are only so many dollars circulating down here after all. I think we'll see moments where the BCRA can relax and get help from the organic process and where momentary instability requires artificial intervention, but expats should prepare for the possibility of a lengthy process.

IMO, the situation here is actually quite scary for dollar earners because you have a huge cushion of black market dollars being liquidated that is allowing inflationary peso prices to essentially not show up in the dollar. In additon you have political instability/foreign trade embargoes in the US casuing a falling dollar at the same time. The result is quite disastrous for expats, as they will experience a continual erosion of purchase power from both sides with no real means of relief in the FX market

If you dig a little deeper you will see that the 20 billion is still available to use if "needed". They were quoted in December, saying that they might tap into the 20 billion to use for partial payment for the upcoming payment in Jan 2026. This means there is a support for the peso regardless. Speculators are staying away. As for believing it was paid back? lol show me proof.

I don't put any faith in what the BCRA does or says as they have proven to be powerless alone, without help from the outside.
Yes there is an Organic part to this but clearly back in October it was 100% artificial. The USA literally stopped the peso that was destined for 2 by elections. I watched it happen tick by tick. Once Melei went to Washington, the peso stopped dropping. That's not Organic.
As to now, well there is little interest in selling the peso as things are calm and will be for a long while. Dollars are still in demand but fear has now passed. It's the 1990's all over again. Argentina never learns their lessons.

Meanwhile REAL inflation is closer to 10% per month in things like Beef and Restaurants. The very things Argentines value most.

You've gotta be a moron to move here now and expect things to be cheap in USD terms. Sure things aren't on par with the USA per se yet but as time goes on anybody earning USD and staying in Argentina will see their purchasing power decline through the next few years to probably match the USA(minus real estate and health care) Inflation, whether you like it or not, is very much a Argentinian past time and they love raising prices just to make more money, even if the currency is strong. Your saving grace will be a leftist winning and reversing all of these USD destroying policies.

No doubt the left will win again at some point because things haven't really improved. The whole house of cards will fall and a repeat of early 2000's will absolutely happen. Give it time.

 

[sergio]

my guess is that it would be very unstable...

and what would likely be the dollar / peso exchange rate?

 

[LuckyLuke]

For expats who earn in USD. For others, the falling value of the USD helps, I believe?

It's a very complicated question. I think it depends on who you ask. In a world of limited resources allocated by government there will always be winners and losers. I don't expect everyone is pleased regardless of who is governing. But, politics aside, the previous level of inflation was clearly unsustainable. That being said, I've mentioned my view before that Milei's policies are IMO too much, too fast. It's affecting too many sectors at once and by extension too many people. We'll see if he continues to get the support he needs. The last election, despite claims of last minute US intervention "saving the day", was by and large a national sweep.

 

[LuckyLuke]

As for believing it was paid back? lol show me proof.

What? Do you have proof they borrowed it to begin with? Do you have proof any of what's reported by the IMF, Bessent or the BCRA is real? This is a pointless line of thought. The FX market clearly knows more than you or I do and will respond accordingly.

Once Melei went to Washington, the peso stopped dropping. That's not Organic.
As to now, well there is little interest in selling the peso as things are calm and will be for a long while. Dollars are still in demand but fear has now passed. It's the 1990's all over again. Argentina never learns their lessons.

Per your own words all it took was an "availability" to tap $20 billion to end what was just fear and speculation to begin with. Exactly as Milei suspected and why he sought US support. Any fundamental shortage of dollars would have shown up by now and the BCRA would be burning through those billions quickly. Something that is not happening, but could if fundamentals change.

I don't think it has to do with Argentina "learning", I think that this country has it's own cycles that are more extreme than the USA and expats generally don't stick around long enough to "learn" themselves. In addition to Argentina's Left/Right political swings, you have Nationalize/Private swings, and investment appetite for Peso/USD swings, and ultimately by extension... Expats coming here/leaving here swings.

Your saving grace will be a leftist winning and reversing all of these USD destroying policies.

No doubt the left will win again at some point because things haven't really improved. The whole house of cards will fall and a repeat of early 2000's will absolutely happen. Give it time.

I disagree...IMO your only saving grace is to diversify your revenue & investment streams in both pesos and USD to hedge against either risk.

Talking about "improving" or a "house of cards" is simply ascribing to one side of the cyclic swing as the "only solution". Personally, I think the only solution is simply understanding the cyclic nature and adjusting your strategy. The older Argentines (and expats) understand this better than we give them credit.

 

[nikad]

and what would likely be the dollar / peso exchange rate?

I have no idea, the current one is not real. It was not with the previous administration either.

 

[nikad]

For expats who earn in USD. For others, the falling value of the USD helps, I believe?

I am by no means an expert in economy, however I remember at some point with CFK dollar was kept very low but Argentines were seeing a benefit. I don't think it is the case now at all. I am not saying that it was good, but at least the common people had money to spend. Right now the only ones seeing any benefit are.... I just can't see it! Maybe financial sector, mining, not sure who else.

 

[on the brink]

There is more here than meets the eye. It was announced not long ago that the $20 billion loan from Bessent was already repaid. There is no currency intervention this very moment in the FX market, in fact the BCRA is actively buying dollars to shore up foreign reserves without running into the unintended risk of the dollar hitting the top of the FX band. This could only be achieved with sufficient agro/import/foreign investment dollars incoming to avoid the BCRA buying too many of the small pool of dollars needed for export/foreign trade contracts..thereby causing a dollar shortage (rising dollar). The BCRA is also now providing "positive" interest rates, which further reduces dollar speculation.

These are the two requirements of the IMF that the BCRA has struggled to meet because of the delicate balance of import/export dollars. IMO, so long as this continues and the BCRA continues to show that there are sufficient dollars to meet national needs and that investing in the peso will yield a greater return, then it could remain stable for some time. There are many factors that could destabilize (foreign debt obligations, speculations, commodity prices, polticial instability, etc.), given the shortage of dollars which is why it's crucial the BCRA continue shoring up it's foreign reserves.

I want to point this out, because I see a lot expats here thinking all of this is artificial intervention. There is an organic part of this too. You have vast sums of dollars under the mattress that are losing to inflation right now. They are being invested, converted to plazo fijo, or sold to pay the rent. This could be a temporary effect, there are only so many dollars circulating down here after all. I think we'll see moments where the BCRA can relax and get help from the organic process and where momentary instability requires artificial intervention, but expats should prepare for the possibility of a lengthy process.

IMO, the situation here is actually quite scary for dollar earners because you have a huge cushion of black market dollars being liquidated that is allowing inflationary peso prices to essentially not show up in the dollar. In additon you have political instability/foreign trade embargoes in the US casuing a falling dollar at the same time. The result is quite disastrous for expats, as they will experience a continual erosion of purchase power from both sides with no real means of relief in the FX market.

Quite agree. The current situation is alarming for those paid in dollars. The one bright spot is for the lucky souls who invested in the USA stock market, which took off like a rocket last year. But,,,,,,, it could still fizzle.

Myself, I fear the Biblical seven years of fat cows are over, and we are in for a longish belt-tightening period,
But this, too, shall pass. Just another cycle of this chaotic country.

 

[ksm76]

It's a very complicated question. I think it depends on who you ask. In a world of limited resources allocated by government there will always be winners and losers. I don't expect everyone is pleased regardless of who is governing. But, politics aside, the previous level of inflation was clearly unsustainable. That being said, I've mentioned my view before that Milei's policies are IMO too much, too fast. It's affecting too many sectors at once and by extension too many people. We'll see if he continues to get the support he needs. The last election, despite claims of last minute US intervention "saving the day", was by and large a national sweep.

I never said there was an intervention in the elections. I said there was in the peso. That's a big difference. Melei I think jumped the gun( by begging Trump for money), because even if the peso was at 2, I think the people would have still voted for him.

Of course Melei won by a large margin. Even though Argentina is shockingly expensive, relative to it's neighbors, the people of Argentina couldn't and didn't want to go back to the past 5 years. Plus now they can vacation in Brazil, Chile and the few in Europe. Their income by a large margin (those not paid in USD) has increased along with the rise in inflation. It funny that Melei didn't cut that Socialist mandate. It would have been suicide. So the people haven't felt it over the past 2 years as much as Expats, so they are feeling hopeful in relative terms. They all felt great in the late 1990's too.

But there will be a reckoning to be had for keeping the Peso so strong by intervention. Not sure how this even a debate.

 

[ksm76]

What? Do you have proof they borrowed it to begin with? Do you have proof any of what's reported by the IMF, Bessent or the BCRA is real? This is a pointless line of thought. The FX market clearly knows more than you or I do and will respond accordingly.


Per your own words all it took was an "availability" to tap $20 billion to end what was just fear and speculation to begin with. Exactly as Milei suspected and why he sought US support. Any fundamental shortage of dollars would have shown up by now and the BCRA would be burning through those billions quickly. Something that is not happening, but could if fundamentals change.

I don't think it has to do with Argentina "learning", I think that this country has it's own cycles that are more extreme than the USA and expats generally don't stick around long enough to "learn" themselves. In addition to Argentina's Left/Right political swings, you have Nationalize/Private swings, and investment appetite for Peso/USD swings, and ultimately by extension... Expats coming here/leaving here swings.


I disagree...IMO your only saving grace is to diversify your revenue & investment streams in both pesos and USD to hedge against either risk.

Talking about "improving" or a "house of cards" is simply ascribing to one side of the cyclic swing as the "only solution". Personally, I think the only solution is simply understanding the cyclic nature and adjusting your strategy. The older Argentines (and expats) understand this better than we give them credit.

Well, I'm well connected to the Financial world as it's my profession and I work along people that are in the loop and 100% there was somebody selling the dollar and buying the peso soon after Melei visited trump. Want to know who that was? The Peso decline virtually stopped the day he went to Washington. The financial footprints were there. Agreed, FX markets knows and it showed an intervention, prior to the elections. Now after the elections, imho the intervention stopped. It just wasn't needed anymore. Calmness prevailed

You might have a positive view on Argentina and it's future. I'm not in that Camp. The country will always be an absolute mess. This will never change. The oligarchs in Argentina will never let it be free(like Chile) They are in control. It's Cultural, power and greed.

Cycles don't exist in Argentina. It's one big cluster F, recession for years on end. Tell me when the last time there was economic growth that lasted more than 6 years, prior to the 2003-2008 boom post devaluation in the past 80 years? Tell me. I'll wait for the answer.

 

[LuckyLuke]

So the people haven't felt it over the past 2 years as much as Expats, so they are feeling hopeful in relative terms. They all felt great in the late 1990's too.

But there will be a reckoning to be had for keeping the Peso so strong by intervention. Not sure how this even a debate.

Time will tell...this is not a peg like Menem. It's a dirty float. You know who else uses a dirty float...Japan, India, China, Chile, South Korea, Brazil...among others.

Whether Argentines feel they are better off or not is certainly being debated by many voters. Personally, I think the reckoning for the strong peso is already happening, sectors all over are in free-fall from collapsed consumption, competing imports/exports, rising unemployment, privatization, suspended State projects, etc. and for those who can't afford to vacation in Brazil or buy trinkets on Shein there's no relief in sight as Milei gleefully stacks his chips.