Long-Term Predictions For The Peso?

[Rich One]

If an agreement is reached with the Vultures next week the Dollar Blue will remain in a plateau until September. Then 15 increase to year end!

 

[Mockingbird]

Some raw data and economic indicators to take into account when making " predictions " About the Argentinian currency and overall economy.

 

[Mockingbird]

Some more.

 

[ajoknoblauch]

This being Argentina, I would never rule out the possibility of financial panic, spectacular economic collapse, and another new currency as (un)worthy successor to the peso ley, peso argentino, austral, et al.

 

[Davidglen77]

The peso will continue to be devalued, that is something that is almost guaranteed. Reason being, all of the foreign companies that do "off shoring" and have operations here, will simply close up shop and move operations to other countries if they don't. Remember when foreign based companies pay salaries here from the US or Europe, they are forced to liquidate their hard currency at the official rate, which now stands around 8.20. Once inflation starts to eat away at that (as it does every month) and they have to raise salaries, pay out more pesos, well then, that cuts into their bottom line....so the government does foreign companies a big favor and continues to devalue the currency against the dollar. There's no secret formula, that's how it works here.

 

[Rich One]

The peso is overvalued!!! at 8 pesos per dollar . A TV conductor, Gelblung asked Navarro, the economist, yesterday, Is it possible that a coffee and other super market product prices are higher here than Paris or NY at the official rate? When the average income there is many times higher than here.??? I also wonder.

 

[AmigoArtistico]

Here's the foreign currency futures traders' view -- at the moment -- of the direction of the official peso:

http://www.barchart.com/commodityfutures/Us$/argentine_Peso/AAM14

At the moment that I posted this, the August, 2015 contract is predicting an official peso at 11/UDS. That's a pretty steep devaluation for the next year, but two weeks ago, the contract was predicting a price of 11.65/USD.

You can click the links to the various contracts and then look at the charts to see the general trend of where futures investors think the official peso is going.

It's one more set of data to consider.

 

[Mockingbird]

Here's the foreign currency futures traders' view -- at the moment -- of the direction of the official peso:

http://www.barchart....tine_Peso/AAM14

At the moment that I posted this, the August, 2015 contract is predicting an official peso at 11/UDS. That's a pretty steep devaluation for the next year, but two weeks ago, the contract was predicting a price of 11.65/USD.

You can click the links to the various contracts and then look at the charts to see the general trend of where futures investors think the official peso is going.

It's one more set of data to consider.

This would place the dollar blue at 15. Sounds about right although I personally think its a tad pessimistic.

 

[Matiasba]

Argentina will continue to benefit from the peso devaluating, so Argentines should push the next government to continue to keep pesos cheap and the dollar expensive in order to boost local industry and employment.

I dont understand, why do you say devaluation beneffits Arg? please explain...

who looses with a devaluation? workers, argentines in general, 90% of argentines that earn in pesos. Its a mass salary depreciation.

Right, but you also need to have cheap salaries in order to be competitive for export. So industry, local salaries, must be competitive but not so much because that depreciation includes a loss in their power purchase, am I right?

So there must be a balance... you have to have competitive salaries to export more to activate industry, but you also need higher salaries to reactivate the consumption virtuous circle, because that high salary goes to the economy...

I dont understood what you said.

 

[EdRooney]

Sorry I didnt have time to answer this yesterday Matías.

Devaluation has two types of effects: direct and indirect.

The direct effect is on creditors/debtors with accounts linked to foreign currencies. In this case it favours borrowers and sucks for lenders. This is can be an exogenous effect on internal credit depending on how tightly capital is tied to the foreign exchange market.

The indirect effects (which are far more significant) have especially to do with the labour market. As the peso devalues it has a double effect: Argentine exports become more attractive, and foreign imports become more expensive. The result of both of these is the development of internal industry, which inevitably improves the labour market: with lower unemployment, real wages go up, employees have more leverage, etc. This in turn leads to more people with more money in the domestic economy (more internal demand) and the effects multiply. So the devaluation has the opposite effect of what you mentioned: it leads to higher real wages.

This is the way all developed economies have always been able to grow-- by fostering internal demand. The examples are everywhere: South Korea in the 70s/80s, West Germany in the 60s, China right now, the US in the 19th-20th centuries...

On the other hand, the idea of having cheap salaries in order to compete has inevitably turned out to be a drain on the economy, as it leads to capital flight. Just look at El Salvador, Haiti, Cambodia, Bangladesh... They get foreign investment, but their overall economies are worse and worse because there is no internal demand.

Does that make sense?