I wish I were smarter. The change in the exchange rate....I don't see how that affects the price of lettuce down at the corner market. If someone outside the country needs pesos to purchase this lettuce.....he will pay more for the pesos.....but the owner of the store on the corner....he does not know or care about the conversion rate. And the other guy I know, Argentinian, who buys dollars to save with.....how much of a premium he will pay over the official rate, that is a function of the availability of dollars with this government....and nothing else. There is no formula to know the premium of the blue peso....period. Is there any reason to feel safer in the local currency? not yet. Will it ever be safer than now....that is just a prayer at this point. So to me...that new official conversion rate....doesn't change anything until there might be some kind of change in demand for dollars. The local price of the lettuce is the same today as it was yesterday and will be tomorrow.
- There is no formula to know the premium of the blue peso
The Blue, MEP, Dolar Cripto, CCL, etc are all around the same rate because that's the market equilibrium where supply and demand meet for USD/ARS.
- Is there any reason to feel safer in the local currency?
No. The dollar with all it's flaws has proven to be a much better store of value than the peso or almost any other currency.
- The new official conversion rate doesn't change anything
It does change things, just one example is that imports are essentially subsidized by the central bank when the official rate is lower. You say well lettuce isn't imported, true, but some of the inputs of the production of that lettuce may be imported. This is a hypothetical example, but maybe the fertilizer to grow the lettuce is imported, the machinery and it's parts are imported, the pesticides, etc.
Then you have subsidies being removed for energy, gasoline, etc and the costs for the producer and verdulera have gone up too.
Since everything to produce that lettuce has gone up in cost, you will pay more for it.
The previous government was subsidizing everything to keep prices down, but it has bankrupted the country. Milei's idea is to give the economy shock therapy which is to remove all these measures that were keeping prices artificially low to make the government solvent.
The measures will likely be successful from an economic standpoint, but there may be too much social discontent. That's why one of the measures they announced is to increase welfare payments.
We'll see what happens. Something had to be done.
