Hyperinflation ante portas

[Rich One]

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Hyperinflation will of course result in an increase in purchasing power of the USD. In USD terms, it is a hugely deflationary event. For example, all those contracts in society that are in pesos just lost enormous value. In addition, other society contracts like minimum wages, sticky wages, etc, just lost tons of value. Argentina economy is like 60%+ service, so the loss of labor value will be huge benefit for USD holders.

During the initial disruption there could be a supply or hoarding shock, which could cause a temporary shortage or overprice of some goods. During this time period that trade slows down drastically between parties, then it may be disadvantageous even for USD holders. However, this would be a temporary shock. That is why it is good to stock a few things to ensure you have all the products you need during any moment of disruption.

Overall, the hyperinflation will relatively benefit expats greatly.

Temporary shortages may happen and affect all of us.

Can you factor in the Social Unrest factor that disrupts all normal activities , the fabric of the social and business society..! No matter how many dollars you have or what crystal tower you live in.. If they block the food supply chains, or the cash supply to ATM's etc.

 

[Alpinista]

Hyperinflation will of course result in an increase in purchasing power of the USD. In USD terms, it is a hugely deflationary event. For example, all those contracts in society that are in pesos just lost enormous value. In addition, other society contracts like minimum wages, sticky wages, etc, just lost tons of value. Argentina economy is like 60%+ service, so the loss of labor value will be huge benefit for USD holders.

During the initial disruption there could be a supply or hoarding shock, which could cause a temporary shortage or overprice of some goods. During this time period that trade slows down drastically between parties, then it may be disadvantageous even for USD holders. However, this would be a temporary shock. That is why it is good to stock a few things to ensure you have all the products you need during any moment of disruption.

Overall, the hyperinflation will relatively benefit expats greatly.

I see the logic of your argument and I share it, at least short-term. But could it not develop into situation where the production will decrease as companies will default, some won’t produce any longer as the price controls make it impossible to continue (I assume price controls will be imposed by the government)? If that were the case, could it not become even more expensive also in USD terms? I am not very familiar with the situation in Venezuela (I am not saying we are there yet ....), but is it not also in USD extremely expensive meanwhile?

 

[Bajo_cero2]

I see less inflation than in 2019. I think we wo for deflation. Take a look at ML or Farmacity and the 50% offs.

 

[FallenAngel]

I see the logic of your argument and I share it, at least short-term. But could it not develop into situation where the production will decrease as companies will default, some won’t produce any longer as the price controls make it impossible to continue (I assume price controls will be imposed by the government)? If that were the case, could it not become even more expensive also in USD terms?

Certainly supply shocks can create a situation where certain groups of items become more expensive. Hell, many items are more expensive in USD terms at any time in Argentina than they are in the US due to taxes.

In general, most expats I know purchase all their primary non-perishables (electronics, clothing, etc) outside the country already due to this. Their primary interaction with the Argentina economy is with services (food prep, dog walking, delivery, medical, transport, etc) and all of these things become big time less expensive. Food basics will never disappear (rice, meats) in a country like Argentina.

The other category of spending most expats I know spend is assets which will also be hugely deflationary in USD terms. Proprety prices will go down alot and so will rents (already have). So, overall, I do not see expats being disadvantaged for most spending and preference mixes.

If your life depends on some imported luxury good like let's say real maple syrup, then you may feel the pinch as these type of goods will likely no longer have enough consumer base to continue being imported, so you will face a disruption to your personal consumption. Most people are not so picky though.

Regarding other quality of life factors like crime, unrest, brain drain, etc, I would definitely expect this to get worse, but some people do enjoy the chaos that some unrest gives. Just make sure the walls around your flat are high enough.

 

[Iznogud]

Beware of Banks!
During the 2001 crisis the banks pulled all sorts of shit on their clients. Spared no one.

1) Had a job working outside CABA and received a PESOS check instead of the dreaded Patacones circulating in Pcia. de BsAs.
Deposited said check at my CitiBank as usual in my Pesos account. Time went by and the money did not show up in my balance. Called the bank and they told me the check had cleared and the money was currently in my Dollars account. I have no such account, I said.
YOU DO NOW, they responded.
Well, I deposited pesos and need pesos...
SORRY SIR, you must be aware that transactions with Dollar accounts are currently forbidden, have a nice day.

2) Itau kept messing with me each time I went to the Abasto COTO. After tiring lines at the cashier´s, i usually ended up with a bouncing plastic in spite of having enough credit and cash at the bank. Decided to close the account and filled all the formailities to do so. Ended with the proper document stating the account was closed.
They started calling me regularly claiming I owed them money. It was a very small amount, not worth my time, even having the bank half a block away from my office. Told them they had issued me the document stating I was debt free and they said it meant nothing to them.
Eventually, I went there and payed them the less than $10 (pesos) they claimed.
Months after this, they started calling again. Now saying they OWED ME money.
Went once more to make sure they would go away once and for all. They told me they could not refund me the money they owed me because I no longer had an account with them.

3) BBVA. Had an account opened while living in Recoleta but made my office in Almagro my mailing address. Never an issue until one day they decided to make a small matter a big matter. They mailed me at my (former) home instead of using my mailing address and since I had relocated to Almagro the letter went unnoticed. Whatever it was, it became an issue. Can´t remember what it was but they drove me nuts since nor the Alvear or the Corrientes offices were involved and I had to chase the invisible sender for months. Got rid of them to.

4) Last but not least. I have a friend who won the lottery and made a ton of money. He carried no cash but had an impressive collection of CC.
He had several Plazos Fijos for over quarter of a million USD going on and those would cover his bills every week or fortnight. Anyway, when SHTF the bank rolled all his PF into one and since he could not withdraw over $5000 Pesos per week, called him and asked him to BRING CASH to the bank. He headed for Ezeiza instead.
He got cleaned by his bank. He now lives abroad, dimeless.

Beware of Banks!

Iz

 

[Alpinista]

I see less inflation than in 2019. I think we wo for deflation. Take a look at ML or Farmacity and the 50% offs.

I mean with deflation you dont mean a negative inflation? You mean just less inflation, say 20%?

Anyway only future will tell. To me it would be a miracle. and go against all money printing logic if the inflation rate would only stay halfway stable. The only thing in my book which can bring some (short time) stability would be (again) a huge bail out by the IMF.

But in the end it is something I would be glad to be proven wrong. Lets see

 

[mc kenna]

Cash ,non perishables, and something no one mentioned here yet, know your grocer well and get to know their whole sellers or distributors, buy in bulk and leave a tip, be generous but not too much, when shortages happens, most likely there'll be something in the back room for you when no one else can get it......

 

[Dougie]

In the immediate future there may not be much inflation because of the current demand shock, but once demand recovers you might see inflation take off. The money supply growth is completely vertical!

 

[on the brink]

About stocking up: along with essentials like rice, canned tuna, and toilet paper, it is prudent to stock up on pesos, and to keep the gas tank full.

 

[antipodean]

About stocking up: along with essentials like rice, canned tuna, and toilet paper, it is prudent to stock up on pesos, and to keep the gas tank full.

I agree, but toilet paper? This is the land of the bidet and personal freshness!