Milei’s quest to defuse Argentina’s currency control bomb

[FrankPintor]

Doesn't sound logical to me. Why put it in real estate (which is highly illiquid) if you can keep it in a dollar account? I would be curious to know exactly what the cepo limitations on capital flight is.

The conversation has moved on rather quickly, but there can be excellent reasons for companies to invest in bricks and mortar, which generally appreciate in value even in Argentina. Remember that profits generated in Argentina are in Pesos, so holding them in Dollar accounts exposes them to currency risk, or even a “corralito “ (don’t say it couldn’t happen). Plus investments in property here might even generate rental income. It doesn’t seem outlandish to me.

To avoid the timebomb mentioned, I think it would be necessary to make investment in Argentina more attractive to companies than simply taking their money out of the country. As usual, this would require actual thought, something this culture warrior work shy lot are seemingly incapable of.

I don’t want to bang on about Ireland, but since it’s Milei’s self-proclaimed destination, with only 24 years to go as @Quilombo has pointed out on his timeline ( or more, since he started off in the wrong direction), I’ll leave you with the concept of NAMA: after the 2008 financial crisis, Ireland set up a “bad bank” to manage all the assets of insolvent banks and companies, some EUR77 billion in total. Companies and assets were taken over by NAMA, and gradually sold off; as nobody really expected, NAMA made a profit for the country of about EUR5 billion, which really isn’t bad at all. Examples of how to deal with Argentina’s problems are out there. You don’t have to be an intellectual heavyweight, something Milei certainly isn’t, to find them and apply them. How wonderful it would be if “monkey see, monkey do” applied to this rather that copying his orange haired idol up north.

 

[Redpossum]

Otro tropezón del plan ecónómico | Escaso resultado por la baja de retenciones. El FMI restringe su apoyo

La liquidación de exportaciones no fue la esperada y empiezan los cortocircuitos. El FMI limitará su respaldo financiero.

www-pagina12-com-ar.translate.goog

The usual Google Translate deal, banner is in Castellano and story will initially appear in that tongue, but wait a few seconds and it will change to English.

So, two weeks ago, when the IMF delegation arrived for talks, Caputo lowered the rate on retenciones, boldly announcing that this would result in a flood of additional exports, and bring in dollars to fill the coffers at the Central Bank. But it didn't happen.

The results obtained by the government in the first two weeks after the decision to reduce export duties on the main exportable agricultural products are far from meeting expectations. The export declarations from Thursday, January 23 to Friday, February 7, barely reached a FOB value of 742 million dollars, adding those corresponding to soybeans (flour and oil), corn, wheat and barley. For now, not only has there not been an export boom , but the figures do not differ from those expected for this date, since before the reduction of withholdings.
....
The IMF officials returned to Washington with more questions than answers, in addition to the information on their PCs that the interventions of the BCRA by selling dollars in the CCL had continued during the days they remained in Buenos Aires.

Sources linked to international financial organizations say that the IMF already has a prevailing opinion that the Argentine government will not be disbursed the amount requested (between 11 and 15 billion dollars), but at most, a figure that will allow it to meet the year's payments to the IMF and perhaps to other international organizations. That is, between two and four billion dollars.

 

[LuckyLuke]

The conversation has moved on rather quickly, but there can be excellent reasons for companies to invest in bricks and mortar, which generally appreciate in value even in Argentina. Remember that profits generated in Argentina are in Pesos, so holding them in Dollar accounts exposes them to currency risk, or even a “corralito “ (don’t say it couldn’t happen). Plus investments in property here might even generate rental income. It doesn’t seem outlandish to me.

To avoid the timebomb mentioned, I think it would be necessary to make investment in Argentina more attractive to companies than simply taking their money out of the country. As usual, this would require actual thought, something this culture warrior work shy lot are seemingly incapable of.

I don’t want to bang on about Ireland, but since it’s Milei’s self-proclaimed destination, with only 24 years to go as @Quilombo has pointed out on his timeline ( or more, since he started off in the wrong direction), I’ll leave you with the concept of NAMA: after the 2008 financial crisis, Ireland set up a “bad bank” to manage all the assets of insolvent banks and companies, some EUR77 billion in total. Companies and assets were taken over by NAMA, and gradually sold off; as nobody really expected, NAMA made a profit for the country of about EUR5 billion, which really isn’t bad at all. Examples of how to deal with Argentina’s problems are out there. You don’t have to be an intellectual heavyweight, something Milei certainly isn’t, to find them and apply them. How wonderful it would be if “monkey see, monkey do” applied to this rather that copying his orange haired idol up north.

I don't know Frank, it's sounds like a pretty awful deal to me. You get to invest all your money here and we'll force you to liquidate it into a depreciating currency that you'll never be able to take out of the country. Exactly what is the upside of that? This is like asking an Argentine to work while all his salary gets banked in Zimbabwe and telling him how awesome it is to invest in Zimbabwe. They really expect that international board members are tripping over each other to buy some arable land in La Pampa so they can generate zero profit for their shareholders? Seems they forgot that there's plenty of arable land elsewhere.

I agree with you, they need to either make Argentina more attractive to keep their money here or cut a deal to allow some portion of the profit to be transferred. Prohibiting all foreign profits while praying for more foreign investment seems like a pretty self explanatory situation, but then again I'm just a newcomer here...

 

[mikic007]

He just did a massive blanqueo which brought in 19 billion dollars with CERA requirements to invest it domestically. Doesn't sound like much of an escape plan to me...

Sounds massive, but it wasn't really that much in great scale. 330.000 people put in average 60k usd in the accounts. Not a bad move from the government, but this doesn't change the fact, that if Argentina would open as any other normal country, there would be huge capital exodus.

 

[LuckyLuke]

but this doesn't change the fact, that if Argentina would open as any other normal country, there would be huge capital exodus.

I agree, it's a pretty remarkable statistic. It does make me wonder if the CEPO is helping create distortions in the real estate market which are highly inflated in some places.

 

[sergio]

Trump will announce new tariffs tomorrow. Will Argentina be on the list? He said he intends to act against countries that place tariffs on US goods.

 

[Redpossum]

Trump will announce new tariffs tomorrow. Will Argentina be on the list? He said he intends to act against countries that place tariffs on US goods.

As amusing as that would be, it seems highly unlikely.

 

[LuckyLuke]

As amusing as that would be, it seems highly unlikely.

More likely it will be on the Mercosur and EU trading bloc as a whole rather than Argentina directly. Mercosur, I believe, levies a 13% general tariff on American goods.

 

[Ronnie Hotdogs]

I don't know Frank, it's sounds like a pretty awful deal to me. You get to invest all your money here and we'll force you to liquidate it into a depreciating currency that you'll never be able to take out of the country. Exactly what is the upside of that? This is like asking an Argentine to work while all his salary gets banked in Zimbabwe and telling him how awesome it is to invest in Zimbabwe. They really expect that international board members are tripping over each other to buy some arable land in La Pampa so they can generate zero profit for their shareholders? Seems they forgot that there's plenty of arable land elsewhere.

I agree with you, they need to either make Argentina more attractive to keep their money here or cut a deal to allow some portion of the profit to be transferred. Prohibiting all foreign profits while praying for more foreign investment seems like a pretty self explanatory situation, but then again I'm just a newcomer here...

You can get your money out but it's through buying and selling bonds so I think you get something like the MEP rate.
If your profits aren't great then it may not be worth it so you may decide to keep them in the country until such are time as it's advantageous to take them out.

 

[Redpossum]

More likely it will be on the Mercosur and EU trading bloc as a whole rather than Argentina directly. Mercosur, I believe, levies a 13% general tariff on American goods.

A good observation, but it would still affect Argentina, right? And Brazil, which might lead to another devaluation of the real, thus putting even more pressure on the Argentine peso.