Macri Our Saviour One And Only One Dollar...?

[Redbeanz]

I expect its because it hasn't changed much in a year yet everything is around 20-30% more expensive.

Ah! I took it literally to mean that the existence of a blue dollar was the problem, not that the rate is the same as a year ago, while inflation has continued its march. Yeah. Not good.

There are some silent elements of inflation that can hit you in the face, though not among the elements that are normally counted. A simple example is the 80% increase in one neighborhood restaurant's cubierto, during the past 10 months. A small item, yes, from 28 pesos to 52. Outrageous for a cubierto, but nothing immediately noticed or "counted." Still, added to many other silent factors, very noticeable in the aggregate.

But a different story from the blue dollar. Not trying to hijack Ceviche's thought.

 

[AmigoArtistico]

That's an excellent question Richard and one which, in spite of Googling like mad, I'm unable to come up with much.
Wikipedia shows a list of countries with exchange controls but not much else.
Does the patient need shock treatment or more conservative management?

I found this and this so far.

Edit: Sorry, after re-reading the question, I realized that the following doesn't relate specifically to the question. I'd delete it, but it took a long time to write it, and it does talk in general about things necessary to "right the ship" here (in my not so humble opinion). So my apologies for answering the wrong question, and feel free to not read this if that faux pas offends you (or for any other reason).

In the States, in the late 70's, there was very high inflation (relative to general world standards), up to around 14.5% at the highest point, and the US did what a responsible government does to stop it. Then chairman of the Federal Reserve, Paul Volcker, raised interest rates to extremely high levels, which cut consumption and caused a fairly severe recession (again, relatively), which lasted, if I remember correctly, around a year and a half, ending in 1982, and beginning one of the longest runs of sustained economic growth in United States history.

All of Volcker's efforts, as you might imagine, were extremely unpopular (Jimmy Carter was voted out of office), but they worked extremely well, viewed in retrospect.

However, I can't imagine any of that happening here, nor can I imagine exactly what is going to happen here.

There is no politically easy way out of the existing mess, which makes me think that the mess will go on in some form or other until it reaches a breaking point, as it always has in Argentina.

What will make investors return to Argentina (hopefully most agree that this is both a necessary and desirable thing if Argentina is ever going to fix its problems)?

• Removing the cepo and having one value for the currency, freely available;
• Making the INDEC reliable;
• Restoring relations with the US, Europe, Japan and other countries;
• Removing or reducing protectionist tariffs (something Macri has already said he won't do)
• Settling with the holdouts;
• Reducing the enormous debt that the government claims it has "paid off," but in reality is as high or higher than ever;
• Reducing government spending, waste and corruption;
• Strengthening the democratic institutions (nearly impossible; they are weak and getting weaker -- this is a whole other subject) so that potential investors can believe that at any moment their investments will not (again) be at great risk;
• Changing various laws voted by the government which make investing in Argentina unattractive (One example: who can forget Moreno and Kiciloff invading Clarin's annual shareholder's meeting, completely disrupting it, and inviting the press in; Another example: if a shareholder claims that he's being harmed by a public company, that company's board and management can be replaced by the government for up to 18 months -- Risky business for investors)

These are a few of the necessary first steps in fixing the problems here, but I doubt that the political will exists here to actually do all of these things, or do them fully and correctly without making compromises which undermine any chance of real success.

It also wouldn't hurt to have a few economists here who understand that economics is a mathematical science and not a political science, and that actually understand economics. Has anyone been reading Lavagna's latest comments, just as an example? He keeps talking about the danger of a devaluation as if there hasn't already been a de facto devaluation. Except for a few favored groups being subsidized by the few remaining "official" dollars, the entire economy is operating using a dollar at 14 pesos. (And the government is spending lots of public money to keep it that low -- Vanoli is now under investigation for selling dollar futures at well below the world market price in a effort to keep the implicit dollar lower, something that some are estimating could cost the people of Argentina as much as US$15,000 million -- much more than the government currently has actually available in reserves.) But it's not just Lavagna. It's not clear that any economist that is commonly quoted in the newspapers here really understands economics. I suppose it's not surprising if their entire life experience is colored by living in Argentina, but it still doesn't bode well for the future.

To slightly misquote Bette Davis: "[background=rgb(252, 250, 231)]Fasten your seatbelts, it's going to be a bumpy ride!"[/background]

 

[Rich One]

Well Scioli declared he will Attract US·$30 billion per annum in the next 4 years..... so what's to worry about

 

[sesamosinsal]

• Removing the cepo and having one value for the currency, freely available;
• Making the INDEC reliable;
• Restoring relations with the US, Europe, Japan and other countries;
• Removing or reducing protectionist tariffs (something Macri has already said he won't do)
• Settling with the holdouts;
• Reducing the enormous debt that the government claims it has "paid off," but in reality is as high or higher than ever;
• Reducing government spending, waste and corruption;
• Strengthening the democratic institutions (nearly impossible; they are weak and getting weaker -- this is a whole other subject) so that potential investors can believe that at any moment their investments will not (again) be at great risk;
• Changing various laws voted by the government which make investing in Argentina unattractive (One example: who can forget Moreno and Kiciloff invading Clarin's annual shareholder's meeting, completely disrupting it, and inviting the press in; Another example: if a shareholder claims that he's being harmed by a public company, that company's board and management can be replaced by the government for up to 18 months -- Risky business for investors)

1) Ending the cepo is the ideal situation, but it will have major consequences for purchasing power and there are no guarantees that exports will pick up. US imports (the world's biggest importer) haven't even come close to where they were before the crisis. The problem we're facing now globally is precisely this, which is why prices of commodities have fallen (and Argentine has run out of dollars).
2) Agreed.
3) Argentina has relations with US, Europe, et. al. Just because Argentina isn't willing to sign free trade agreements with the U.S. doesn't mean that Argentina and the U.S. don't have good relations.
4) No. Bad idea. (Also, I am pretty sure Macri is in favor of lifting import restrictions and eliminating export taxes (retenciones); of course, with a dollar at 20 pesos, who's going to be able to buy anything imported? ha ha) See the trade balances in the U.S., Greece, Italy, Spain, France and their unemployment rates. Then compare the trade balances of countries like Germany, Netherlands, Norway and their unemployment rates. Countries that produce nothing, are nothing. (Besides, even the U.S. - the free trade mecca - still engages in protectionism, especially if you don't play nice with Washington. What do you think of US protectionism when it comes to Argentine lemons and oranges? Two wrongs make a right?)
5) Agreed.
6) What debt are you talking about? Foreign debt? National debt?
7) That one never gets old, does it?
8) I'd like to add world peace to that.
9) You do realize that the Argentine government is a minority stakeholder (9% in 2014) in Grupo Clarín?

 

[AmigoArtistico]

1) Ending the cepo is the ideal situation, but it will have major consequences for purchasing power and there are no guarantees that exports will pick up. US imports (the world's biggest importer) haven't even come close to where they were before the crisis. The problem we're facing now globally is precisely this, which is why prices of commodities have fallen (and Argentine has run out of dollars).
2) Agreed.
3) Argentina has relations with US, Europe, et. al. Just because Argentina isn't willing to sign free trade agreements with the U.S. doesn't mean that Argentina and the U.S. don't have good relations.
4) No. Bad idea. (Also, I am pretty sure Macri is in favor of lifting import restrictions and eliminating export taxes (retenciones); of course, with a dollar at 20 pesos, who's going to be able to buy anything imported? ha ha) See the trade balances in the U.S., Greece, Italy, Spain, France and their unemployment rates. Then compare the trade balances of countries like Germany, Netherlands, Norway and their unemployment rates. Countries that produce nothing, are nothing. (Besides, even the U.S. - the free trade mecca - still engages in protectionism, especially if you don't play nice with Washington. What do you think of US protectionism when it comes to Argentine lemons and oranges? Two wrongs make a right?)
5) Agreed.
6) What debt are you talking about? Foreign debt? National debt?
7) That one never gets old, does it?
8) I'd like to add world peace to that.
9) You do realize that the Argentine government is a minority stakeholder (9% in 2014) in Grupo Clarín?

Well, I'm not going to write another long post, so I'll just say:
1. Ending the cepo is essential. How many other countries have more than one value for their currency? How do you attract investors that can't "cash out?"
3. I should have said "good trade relations." Argentina has terrible trade relations with virtually the rest of the world. Virtually non-existent right now. US, Japan and Europe have successfully sued Argentina for its import practices (a process which took years), but Argentina is now dragging its feet to comply.
4. Disagree, but certainly we're not going to agree on everything. If I start talking about this, it will get long, so I'll leave it at, "I disagree."
6. Started to write an answer to this one and the answer started growing, so I cut it. Argentina has low foreign debt relative to PBI, which is good, but that debt has been transferred to enormous internal debt, which, among other things, has produced inflation, unemployment, lack of competitiveness in the world markets, massive devaluation of currency, and a massive increase in poverty, so massive that even the INDEC won't publish numbers about it, numbers that would vastly understate the true poverty level.
7. True, but with government spending this year at 8% of the PBI, it is alarming.
8. Added.
9. Of course I realize that. Just as I realize that the kirchnerista congress just passed a law (a parting gift to the next government) making it very difficult to sell government owned shares of public companies. If you are a rational investor, why on earth would you invest in a country that does things like that, when there are hundreds of other countries in which to invest?

Obviously there's much more to say about these things, but if you can read Spanish, all the information is readily available, and of course, none of this is black and white, and moreover when you consider that we are talking about Argentina.

Bradly, I understand your side of things, even where we disagree. We'll never totally agree on some of these things, but we're probably not as far apart on many of them as it may seem.

Anyway, they're interesting issues to think about, and we'll see over the next few months and years how things play out.

 

[Somewhereinba]

It's going to take a lot of changes and time before the peso is worth more than toilet paper overseas. Until the time comes that the pesos can be converted to other currencies at a stable rate there will be a blue.

 

[Matiasba]

...unemployment...

probably the biggest achievement of these K years. Please find me one reliable source (private of course, anti K) that dispute the unemployment numbers of INDEC.
Employment is a key variable, and I bet you than with Macri unemployment will grow and inflation decrease (because of this).

Unemployment has been very low during the K years, very low. 6-7% in todays world is good, despite having 30% of informal job.

 

[AmigoArtistico]

probably the biggest achievement of these K years. Please find me one reliable source (private of course, anti K) that dispute the unemployment numbers of INDEC.
Employment is a key variable, and I bet you than with Macri unemployment will grow and inflation decrease (because of this).

Unemployment has been very low during the K years, very low. 6-7% in todays world is good, despite having 30% of informal job.

Que ta ra do. The INDEC counts everyone on a plan as being employed, and they don't count people who have given up looking for jobs. Unemployment is very high. Even with the enormous, unsupportable number of employees added to the public payrolls in the past few years, helping to add to the massive overspending by the government (8% of PBI this year; absolutely unsustainable).

http://www.lanacion.com.ar/1775792-titulo-42pt-ebortio-dolore-feu-feuguerilit-rate-faci-tem-eu
This article from March, 2015, is interesting in and of itself, but it also suggests consensus numbers of unemployment by private economists of 10-11% (which also don't take into consideration people who have stopped looking for work; it's unclear whether or not they include people on plans as being employed).

Here's another interesting article, which, while not directly and entirely dealing with the obvious discrepancies between reality and the employment picture painted by the INDEC, gives you a pretty good idea of real vs. relato.
http://www.lanacion.com.ar/1826412-las-diferencias-entre-el-chaco-del-indec-y-el-chaco-de-las-mediciones-privadas

Of course, if you have some reliable data to back up your deranged point of view, I'm sure we'd all love to have a look at it.