Is the expat party coming to an end?

[antipodean]

I'm mostly concerned about social unrest as Quilmes said. If someone's salary remains $200/month and rent goes from $100 to $350 for a bachelor, meat doubles, rice/polenta/grains double, tomatoes have doubled, etc. then we're going to see an increase in insecurity and saqueos as desperate people do desperate things.

Many unions have already agreed additional paritarias for December wages to the tune of around 40%. In real dollar terms it means mid-level wages at one highly unionized company I know very well are jumping from around US$500 (ARS500k) to around US$685 (ARS685k). More paritarias expected by February according to how inflation develops. The next months will certainly be asymmetrical as unions play catch up, public and state sector employees anyone’s guess, and the vast majority of Argentine workers are “en-negro” hope to catch up too.

I am no expert but I feel that if Argentina gets very expensive in dollars and salaries are too low there will be social unrest, at the same time if salaries follow it will not be very attractive for investors.

Between 1994 and 2001 the average salary was US$1290 (minimum wage only US$200) and costs in Argentina were higher than most developed countries. In 2002 it dropped to US$400 and they stayed below US$700 until 2008 before climbing back up to US$1400 in 2017 and crashing back down to below US$500 when the bubble burst, where it has been hovering for many years bottoming out under Alberto at around US$200-$300. Working people living in poverty, unable to afford the basics of life, is something we have been living with for years now and somehow avoided social unrest.

For comparison average salary to set realistic expectations of what may be possible in the mid-term, Uruguay is US$1000+ and Chile is US$800+.

On the price side of things, I think it is safe to assume that the days of eating out at Kansas for the price of a happy meal in the most part of the world in dollar terms are over indefinitely. Looking to history as a reference, during the 90s Argentina was not exactly a tourist Mecca nor a prime destination for immigrants from developed countries due to its high costs (which at the ass end of the world, sparsely populated with high levels of income inequality implies a naturally high cost economy is to be expected). But since the real estate market isn’t crazy like Sydney, New York or Paris… I rather doubt we will be seeing $10 coffees here any time soon.

 

[wrangler]

Keep calm and carry on. I don’t think this will come to pass.

If we continue to see inflation in U.S. dollars, then logic tells me that tourism will begin to drop and foreign nationals won't find Argentina as attractive to settle in. My sister, prior to Milei's victory, was planning to move to Mendoza with her husband from the U.S. in a couple of years. That is up in the air now; she said they are going to wait and see. As far as the dollar blue rate is concerned, it's not being controlled; it's just that there is no demand for dollars. If there were demand, there is no way it would not go up.

 

[steveinbsas]

If we continue to see inflation in U.S. dollars, then logic tells me that tourism will begin to drop and foreign nationals won't find Argentina as attractive to settle in. My sister, prior to Milei's victory, was planning to move to Mendoza with her husband from the U.S. in a couple of years. That is up in the air now; she said they are going to wait and see. As far as the dollar blue rate is concerned, it's not being controlled; it's just that there is no demand for dollars. If there were demand, there is no way it would not go up.

We are likely to know a lot more next month (which obviously begins in a couple days) as the international demand for dollars to pay for petroleum declines, perhaps rapidly as well as precipitously.

 

[Quilombo]

What if Massa had been elected? What do you think would have happened? Would inflation be less / the same / more? If Milei goes after 'the caste' at this time, will he get ANY support or will they drive him from office? I don't have the answers but I pose the questions.

The difference is how fast. I think Massa would have "adjusted" like Milei in some ways, but overall done things more slowly, i.e. I don't think he'd ever permit an increase of 40% for health insurance in a single month.

I personally don't think Milei will go after the caste because he, his friends, his new JxC partners, etc. are all members of said caste. It would be biting the hand that feeds him. It's like Donald Trump talking about "The Deep State" when it's members fill his cabinet or stay at his hotels. Plus this is one thing LLA/JxC/UP can agree on: see no evil, hear no evil, speak no evil. The caste remains intact while the average Joe pays for the adjustment.

I am no expert but I feel that if Argentina gets very expensive in dollars and salaries are too low there will be social unrest, at the same time if salaries follow it will not be very attractive for investors. In any case with governments changing rules 360 degrees every 4 years, I am not sure they will be very attracted. Not sure what will follow tbh.

This is an under appreciated issue. Everything done via DNU can be equally undone, and we've also gone from cepo (Cristina) to no cepo (Macri) to super cepo (Alberto) to supposedly no cepo again (Milei) which makes planning beyond say 3 years intervals near impossible for businesses, not that there's tons and tons of them lining up to invest. I wan't to see Argentina succeed, but if I was a consultant for a multi national I'd tell them either expect to be in and out in 3 years, or better yet, wait until the 2027 elections and see what things are like then before making any big/long term commitments.

 

[sergio]

The difference is how fast. I think Massa would have "adjusted" like Milei in some ways, but overall done things more slowly, i.e. I don't think he'd ever permit an increase of 40% for health insurance in a single month.

I personally don't think Milei will go after the caste because he, his friends, his new JxC partners, etc. are all members of said caste. It would be biting the hand that feeds him. It's like Donald Trump talking about "The Deep State" when it's members fill his cabinet or stay at his hotels. Plus this is one thing LLA/JxC/UP can agree on: see no evil, hear no evil, speak no evil. The caste remains intact while the average Joe pays for the adjustment.


This is an under appreciated issue. Everything done via DNU can be equally undone, and we've also gone from cepo (Cristina) to no cepo (Macri) to super cepo (Alberto) to supposedly no cepo again (Milei) which makes planning beyond say 3 years intervals near impossible for businesses, not that there's tons and tons of them lining up to invest. I wan't to see Argentina succeed, but if I was a consultant for a multi national I'd tell them either expect to be in and out in 3 years, or better yet, wait until the 2027 elections and see what things are like then before making any big/long term commitments.

Doing business in Argentina has been like this for many years. If Milei cannot show a significant change in the business climate there will be no foreign investment.

 

[mikic007]

Doing business in Argentina has been like this for many years. If Milei cannot show a significant change in the business climate there will be no foreign investment.

It doesn't really matter, what he shows. Investors aren't stupid, they know in few years everything might change no matter the progress till then. But they like profits, they are reckless often, there is too much money around the world. Argentina should not count on some "might be" investors, they should actively search for strategic investors. There is plenty the world wants from Argentina, and these are the cards Milei has to play with, not some market will adjust nonsense. You want lithium? You must build a factory and produce batteries here. You want land? You need to build processing plant... And contracts have to be signed, of course.

I'm just throwing it out, I'm not qualified nor paid to do the research, how this has to be done. But this is how serious countries are using their resources.

What Milei really has to do is to implement order. I did not hear much about how he'll bring missing taxes in the budget. Serious country is enforcing written laws, that at that moment seem more like suggestions in Argentina. Half of my shopping ends without a bill. Even those that issue me a bill, I doubt it ends in afip. That's part of the deficit. Another is black jobs market. Enforce the rules you already have, is that so hard? Everywhere, from traffic, to business. Instead to focus only on shrinking the spending, take what is rightfully yours.

Just yesterday I was in a discussion about foreigners using free healthcare. Ok, I understand, but what about Argentinians using it, because they don't wear seatbelt or helmets? You already have a law, but 90% of people ignore it. When people can ignore your laws, you lost the control... Everywhere.

 

[sts7049]

The difference is how fast. I think Massa would have "adjusted" like Milei in some ways, but overall done things more slowly, i.e. I don't think he'd ever permit an increase of 40% for health insurance in a single month.

I personally don't think Milei will go after the caste because he, his friends, his new JxC partners, etc. are all members of said caste. It would be biting the hand that feeds him. It's like Donald Trump talking about "The Deep State" when it's members fill his cabinet or stay at his hotels. Plus this is one thing LLA/JxC/UP can agree on: see no evil, hear no evil, speak no evil. The caste remains intact while the average Joe pays for the adjustment.


This is an under appreciated issue. Everything done via DNU can be equally undone, and we've also gone from cepo (Cristina) to no cepo (Macri) to super cepo (Alberto) to supposedly no cepo again (Milei) which makes planning beyond say 3 years intervals near impossible for businesses, not that there's tons and tons of them lining up to invest. I wan't to see Argentina succeed, but if I was a consultant for a multi national I'd tell them either expect to be in and out in 3 years, or better yet, wait until the 2027 elections and see what things are like then before making any big/long term commitments.

massa (christina) only allowed the devaluation when they lost in the election. and barely agreed to issue a 2k peso. dont fool yourself into thinking anything would have changed. the money printing press would have never stopped!

 

[sergio]

It doesn't really matter, what he shows. Investors aren't stupid, they know in few years everything might change no matter the progress till then. But they like profits, they are reckless often, there is too much money around the world. Argentina should not count on some "might be" investors, they should actively search for strategic investors. There is plenty the world wants from Argentina, and these are the cards Milei has to play with, not some market will adjust nonsense. You want lithium? You must build a factory and produce batteries here. You want land? You need to build processing plant... And contracts have to be signed, of course.

I'm just throwing it out, I'm not qualified nor paid to do the research, how this has to be done. But this is how serious countries are using their resources.

What Milei really has to do is to implement order. I did not hear much about how he'll bring missing taxes in the budget. Serious country is enforcing written laws, that at that moment seem more like suggestions in Argentina. Half of my shopping ends without a bill. Even those that issue me a bill, I doubt it ends in afip. That's part of the deficit. Another is black jobs market. Enforce the rules you already have, is that so hard? Everywhere, from traffic, to business. Instead to focus only on shrinking the spending, take what is rightfully yours.

Just yesterday I was in a discussion about foreigners using free healthcare. Ok, I understand, but what about Argentinians using it, because they don't wear seatbelt or helmets? You already have a law, but 90% of people ignore it. When people can ignore your laws, you lost the control... Everywhere.

You are right - and so am I. The whole culture must change. Corruption needs to be reduced to a manageable level.

 

[Rich One]

Inflation can come under control by April if nobody has a job or any money, so there's no demand, which is what I worry about happening.

Milei is an orthodox far right winger economically, so he's pursuing full austerity and hopes the invisible hand of the market™ does something (anyone remember Macri's lluvia de inversiones?) what that something is I have no idea, because as myself and others keep reminding people, every time this sort of "shock therapy" has been tried here or elsewhere, wages remain static at best, and shrink while costs rise.

I'm mostly concerned about social unrest as Quilmes said. If someone's salary remains $200/month and rent goes from $100 to $350 for a bachelor, meat doubles, rice/polenta/grains double, tomatoes have doubled, etc. then we're going to see an increase in insecurity and saqueos as desperate people do desperate things.

Nobody argues a change isn't/wasn't needed, it's the intensity, and the fact it's not falling on "the caste" that's the problem. Have you tried taking a bus lately? It's like waiting in line at ANSES, and we're not even in 2024 yet..

Worth mentioning is the Chilean experience of the application of the Austrian School Shock Therapy. The Austrian economist Hayek went twice to Chile to meet with Pinochet (1974) to discuss a Shock Therapy Plan for Chile. Also influenced the Milton Friedman Chicago Boys.

The result of the Shock Therapy Plan was a freezing and shrinking of the Economy with unemployment levels of 25% plus. Government minimum wage, Work Plans for millions, were established. Protests were restrained . After 8 years the economy showed signs of a turnaround and recovery .

In hindsight, many believe the Shock Therapy Plan could only work in Chile under the Pinochet Regime.

 

[Quilombo]

massa (christina) only allowed the devaluation when they lost in the election. and barely agreed to issue a 2k peso. dont fool yourself into thinking anything would have changed. the money printing press would have never stopped!

I'm not suggesting that Massa would have pursued the same agenda as Milei, but I'm confident he would have changed course more than Alberto and Cristina were letting him as Economy Minister; the man is motivated by self preservation more than any ideology, and it doesn't take a Licenciado en Economía to know that things were/are bad and require a massive change. Like I said, he wouldn't have let prepagas go up by say 40% in a single month, but another devaluation in December, more settlement via the MEP/CCL, more business friendly policies, dancing to the IMF's tune, etc. were all in the cards, and I think this is why most Argentines said "Fuck it, if we're going to have diet adjustment in which we get Alberto's 2nd term with some light changes, v.s. a drastic change, let's go for the later and see what happens."

I didn't support Massa, don't like him, and am still agnostic as to whether he or Milei would be better right now, but I think the writing was on the wall for business as usual. The only people that thought things could continue the way they were was the Campora. I don't think even Cristina believed it could which is why she supported Massa over someone like Grabois who is closer to her ideologically.

The result of the Shock Therapy Plan was a freezing and shrinking of the Economy with unemployment levels of 25% plus. Government minimum wage, Work Plans for millions, were established. Protests were restrained . After 8 years the economy showed signs of a turnaround and recovery .

In hindsight, many believe the Shock Therapy Plan could only work in Chile under the Pinochet Regime.

I think you hit the nail on the head here - such drastic reorganizations of the economy/society require a strong, authoritarian state such as a military dictatorship/single party rule/technocracy and many years to implement it/see results (good or bad) because liberal democracies won't tolerate such shocks and drastic changes.

You can see this in other countries besides Chile too, and from leaders who subscribed to all sorts of different political and economic philosophies such as Lenin in Russia, Atatürk in Turkey, Mao in China, Lee Kuan Yew in Singapore, "The Boss" (France-Albert René) in The Seychelles, or Gaddafi in Libya. The changes these men implemented were drastic and foundational, and required a level of authority and time that Milei simply doesn't have. I still don't think Milei would be successful if he was a dictator or had 50 years to change Argentina, but it would sure make implementing these changes easier.