Prices for all goods and services can now be shown in USD (or other foreign currencies) as from Friday

[antipodean]

The more I think about this the more I realize nothing is as it seems....

Milei is not dollarizing the economy. Milei has created a new currency and it's an Argentine Dollar, or as I like to call it "Milei bucks".

A physical dollar cannot be printed by Argentina. It cannot control it's distribution and redemption value in the United States. The value of the US dollar in the USA cannot be manipulated by the Argentine central bank.

Milei bucks on the other hand is a virtual currency tied to the MEP rate. It is no different than an $1 share of an index fund. It's redemption value in physical dollars is determined at the time of it's liquidation based on a market price (MEP) minus (government dictated) transactional fees.

Can Milei control the distribution of Argentine dollars, yes...by regulating the MEP market. Can Milei manipulate the value of the Argentine Dollar, yes by buying and selling it against the peso or restricting it's redemption quantity.

It is no different than a USDT in that it is "tethered" to the value of a real dollar. By like any other crypto scam, the actual value is determined the quantity of actual dollars the crypto company has banked compared to the quantity of "tethered" crypto dollars it has in virtual circulation on it's platform.

What does this mean? We are back to the convertibility mouse trap and suspension of belief. As long as an Argentine Dollar can be redeemed for a real dollar it's trust and value exists. However, if Milei is caught "converting" more Argentine dollars for pesos than actually exists in the BCRA, then a redemption run will expose it's true value.

Who are the winners, who are the losers?

Those doing commerce in Arg USD are neither. They are simply using one instrument that the government determines the issuance and value of (Arg dollars) instead of another (Pesos).

The winners as Sergio so astutely pointed out are those who are taking pesos or Arg dollars and converting them into physical USD cash or transferring them into USD accounts abroad.

The losers are those who are taking physical USD cash or dollars from abroad and converting them into Argentine dollars (i.e. blanqueo).

The corralito will happen again...but this time there are no physical lock boxes of real dollars being confiscated. Instead it will be your digital dollar accounts being restricted from redemption to physical cash or transference abroad causing it's convertibility value to fall.

Blue will once again represent a real USD and the Argentine dollar will simply be MEP for laymen, having no actual value beyond domestic trade.

Firstly, the MEP is nothing new. Secondly, why would the MEP still be relevant if / when the CEPO is lifted? How would 1 USD in Argentina be worth any less than 1 USD in the UK, UAE or Singapore? Don’t like or trust the jurisdiction your dollar is in, you move it in the click of a button to another - but before you do that, presumably, you still have dues to pay wherever it is you are living, re-injecting some of those dollars back into your local market for them to continue circulating either in their original currency or another.

In the meantime, with the CEPO, there are absolutely no problems turning your MEPs into crisp greenbacks at the bank teller window that you will have absolutely no problem spending from Miami to Montevideo. I don’t see any quasi-dollar here, just a slightly more expensive one.

The question isn’t about how individuals and businesses will choose to transact (after all, without government imposed restrictions, they have a global market and supply of currencies to buy from) but how the state will finance itself and pay its dues from the domestic market it governs, which is presumably why this government unlike all
of its predecessors wants a smaller and cheaper state. As for any future government that thinks differently about expenditure, they may well have a fiscal minefield to navigate of a worthless mountain of pesos they control and a privately held fortune in dollars circulating just within their reach but outside of their influence. But that’s a familiar bridge to cross in a few years or a decade from now - afterall that’s why Macri bought back the CEPO after lifting it for a short while some years ago ;-)

 

[mikic007]

Thanks, I was not aware it is so easy to obtain usd. I heard of exorbitant taxes on domestic cc when spending abroad, so I guessed it's still similar as it was when I was buying them, painstakingly every month. Time will tell I guess.

 

[antipodean]

Thanks, I was not aware it is so easy to obtain usd. I heard of exorbitant taxes on domestic cc when spending abroad, so I guessed it's still similar as it was when I was buying them, painstakingly every month. Time will tell I guess.

If you have an Argentine USD bank account (eg Santander) you can buy MEP via the home banking app or third party apps like Cocos Capital, Astro Pay and even MercadoPago (“Ver más” - “Tu dinero” - “Dolares”) etc to buy and sell MEP.

Astro Pay issues virtual Visa debit cards in USD (issued in the US, managed from Argentina) that you can use via ApplePay or online, so you can pay foreign consumption directly in USD purchased at MEP (or simply deposited in cash) to avoid all taxes when spending abroad.

 

[Silvie]

I'm missing the point why would anyone pay in usd, that cannot be freely bought. And how will be inflation measured, when sellers will higher prices in pesos to try to obtain more usd, which many people have no access to? My lizard brain cannot comprehend what this means and how will affect all in reality...

This is mainly to encourage people who declared USDs to ARCA (ex AFIP), before the end of 2024, to use those dollars declared during the "blanqueo".