Is Argentina on the verge of another crisis?

[Panamahat]

Hi
I am a newcomer to this forum. I have toyed with the idea of moving to Argentina for a few years. I have been looking at recent posts to get a feel for the current situation.

What I have read does not install much confidence in making this move.

It appears that inflation is running out of control. The official government statistics on inflation can not be believed. Bloomberg a major financial organization has recently taken the unprecedented step of no longer publishing the Argentine government inflation statistics because they don't believe them.

The latest decision to ban imports seems like a last ditch effort to control inflation by pretending it does not exist. After all, how would you know toothpaste for example has risen a lot in Pesos, if no toothpaste is available to buy.

The recent changes in taxes on real estate investments seems punitive to foreigners, essentially designed to trap their capital in the Peso, and prevent the free flow of capital in and out of Argentina.

What's next currency controls, changes to the residency rules, new punitive taxes aimed at expats.

I can't help thinking sadly a new crisis is on the horizon if you only read the signs.

 

[BA4me]

I certainly hope not. I am curretnly visiting Buenos Aires for the very first time. I am quite impressed with the city and all of the things there are to do and the french architecture. It's quite the contrast with all of the homeless people on the streets. I never knew Argentina had these problems. I am here visiting my company's offices and they are planning on sending me down for a project that would last for a year or possibly two. I am not sure what to think at this point, it's not really an economic issue as my salary woulnd't change, but I have read so many posts about the quality of life going downhill that I am thinkng twice about accepting their proposal.

 

[JoeGillis]

Panamahat, a new crisis is here already. Definitely, I'd think twice about making a move to Argentina.

 

[sesamosinsal]

The latest decision to ban imports seems like a last ditch effort to control inflation by pretending it does not exist. After all, how would you know toothpaste for example has risen a lot in Pesos, if no toothpaste is available to buy.

The recent changes in taxes on real estate investments seems punitive to foreigners, essentially designed to trap their capital in the Peso, and prevent the free flow of capital in and out of Argentina.

What's next currency controls, changes to the residency rules, new punitive taxes aimed at expats.

I can't help thinking sadly a new crisis is on the horizon if you only read the signs.

Imports could allow the government, in fact, to curb inflation because importers could import products that are produced at a cheaper price. The government could use imports as a baseline. If Argentine manufacturers produce a glass for $4 USD and a Mexican manufacturer produces it for $2, the government could allow the importation of the Mexican product, put on a tax of about 80%, and make it competitive with the Argentine products. ($3.60 vs. $4.00) It's a simplified example.

The issue with imports, however, is the country's dollar reserves. Imports are paid using the dollars from the BCRA reserves (importer converts pesos to dollars [currency of international trade] at the BCRA), and the government needs those reserves to pay the bills. It can't access the credit markets because it still owes on its debts. And even if those loans were paid, the interest rates for new loans would be astronomical. (Who is going to give Argentina a loan after 2002?)

At any rate, the whole world is in trouble. If it's not inflation, it's massive debt, unemployment, etc., etc.

 

[surfing]

"What's next currency controls"

Too late! Currency controls were put into effect at the end of October last year.

 

[va2ba]

As long as I have been on this forum, people have been predicting that the next economic crisis in Argentina was just around the corner.

I think most people are expecting it. It certainly looks like we are close, or that we might already be in the beginning of a crisis, but Argentina has surprised us before.

It might be more of a question about how many tricks CFK has up her sleeve until it finally happens.

 

[Fabe]

this is just another cycle of 2nd term "pillage and run" Its the prelude. Usually argentine presidents leave the economy in ruins when they leave office. It is institutionalised , from intendentes on up.

 

[willwright]

Populist governments like the current one in Argentina have been studied. I believe there was a recent study out of UCLA if memory serves me that found with this type of government, is that things at first go well rapid growth, reduction in poverty, etc. But in the end the populist economic models just don't work and the countries end up worse off in the long run. I think we are getting to the late stages of this populist government and things certainly appear not to be working. I don't see how they will get out of the mess they have created. My guess the real economy will grow probably grow at 2 or 3% with 25% inflation this year. If Cristina makes it to end of her term I will be surprised, I think the whole thing comes crashing down long before then. Their economic policies are simply not sustainable. I think there is going to be increasing levels of unrest and that this government will end badly.

 

[alpac]

I have read so many posts about the quality of life going downhill that I am thinkng twice about accepting their proposal.

Better you don't accept. Pack up and leave asap and bring your little friend with you...

 

[davonz]

If i was you, and would like to come to argentina - just do it. Even if there is a crisis, its not as if you will be struck here, and if you have a contract put something in there - a get out clause...

And as my grandmother use to say - a good crisis every now and then builds character !!!