Prices, Pesos, Dollars

[garryl]

If they are printing alot of money why isn't the peso falling more rapidly?

The peso/dollar ratio is artificially manipulated by Macri gov, just like K did. It's easier to manipulate now because there is more dollar in the reserve.
15.8 is not free market rate. Maric gov think by making the ratio low, they can fight inflation. This will eventually deplete the Argentine economy.

Noesdeayer: Argentina does not produce much products, needs to import many things, from plastic flowers to water boiler parts ..if the importer loses half of their containers or their container stuck in custom for 6 months(if currency rate changes in 6 months), the importer will suffer huge loss, they will pass that to the consumers. That;s why all the junks from China are sold at premium price. The furniture (made in China) sold in Buenos Aires design center is sold as premium products, but they are cheap junks. I just bought a sofa coma on Ave Belgrano, it''s the same price as Pottery Barn in us.

 

[sergio]

Noesdeayer, I was here during the Menem years and it is a myth that prices were astronomical. I bought a property then for 1/3 of what it would sell for now. I was earning a salary in USD that was respectable by US or UK standards. A cup of coffee in a cafe was routinely $1.50 pesos. In some places it was $1.00. Only in deluxe places like Patio Bullrich did it cost more. The same $1.50 coffee is now easily over $2 USD. I distinctly remember that a pechuga de pollo in almost any restaurant was $5. Not sure how much now. Probably more. Food is considerably more expensive. I don't know of many things that are cheap here. My health insurance is over 5,000 pesos, more than it ever cost in dollar terms. This was really never a retiree haven, certainly not like Mexico or Panama. Those who have stayed on and rely on dollars are going to have to make radical adjustments or leave.

 

[ExMontreal]

Some of us have a salary in pesos :angry: because we are not real expats (like me, i just feel expat). So I see my capacity of purchase being destroyed by inflation with no salary increase since april......

Living here is just depressing... I´ve no idea how can someone consider it for retiring.

 

[RodalfoWalsh]

The peso/dollar ratio is artificially manipulated by Macri gov, just like K did. It's easier to manipulate now because there is more dollar in the reserve.
15.8 is not free market rate. Maric gov think by making the ratio low, they can fight inflation. This will eventually deplete the Argentine economy.

    Noesdeayer: Argentina does not produce much products, needs to import many things, from plastic flowers to water boiler parts ..if the importer loses half of their containers or their container stuck in custom for 6 months(if currency rate changes in 6 months), the importer will suffer huge loss, they will pass that to the consumers. That;s why all the junks from China are sold at premium price. The furniture (made in China) sold in Buenos Aires design center is sold as premium products, but they are cheap junks. I just bought a sofa coma on Ave Belgrano, it''s the same price as Pottery Barn in us.

None of that makes any sense. BCRA has been more active in keeping the currency cheap than expensive lately.

 

[garryl]

Argentina is still a good retirement place, there are still things you can find that can not be found in US or Europe. It's just that it does not have much financial benefit.

 

[lamarque]

The peso/dollar ratio is artificially manipulated by Macri gov, just like K did. It's easier to manipulate now because there is more dollar in the reserve.
15.8 is not free market rate. Maric gov think by making the ratio low, they can fight inflation. This will eventually deplete the Argentine economy.

Noesdeayer: Argentina does not produce much products, needs to import many things, from plastic flowers to water boiler parts ..if the importer loses half of their containers or their container stuck in custom for 6 months(if currency rate changes in 6 months), the importer will suffer huge loss, they will pass that to the consumers. That;s why all the junks from China are sold at premium price. The furniture (made in China) sold in Buenos Aires design center is sold as premium products, but they are cheap junks. I just bought a sofa coma on Ave Belgrano, it''s the same price as Pottery Barn in us.

In this one you are terrible mistaken, the Bcra is actually buying dollars and not selling them to the market so is true that is not a total free market but in the opposite way as you mention.
The central bank is absorbing dollars from the market not selling them, in other words is actively keeping the local currency cheap lately. The problem of the actual price of the peso has more to do with the local interest rate and the expectation of the market, this two factors dance one around the other, as the expectation of the peso devaluating is low and the interest rate is hight it generates a circuit in which dollars enter in the market to be invested in different financial instruments like lebacs, or bonds and that same influx of dollars generate more expectations of stability which cause more money to get in, to counter this effect the BCRA has lower the interest rate by half of what it was 12 months ago, so basically the bcra is doing the opposite role of what you have commented, is trying to keep the peso competitive but as it has as well an inflationary target they cannot shock the market suddenly so they just reduce the interest rate to make less tempting for international money to be invested locally in financial instruments.

 

[garryl]

In this one you are terrible mistaken, the Bcra is actually buying dollars and not selling them to the market so is true that is not a total free market but in the opposite way as you mention.
The central bank is absorbing dollars from the market not selling them, in other words is actively keeping the local currency cheap lately. The problem of the actual price of the peso has more to do with the local interest rate and the expectation of the market, this two factors dance one around the other, as the expectation of the peso devaluating is low and the interest rate is hight it generates a circuit in which dollars enter in the market to be invested in different financial instruments like lebacs, or bonds and that same influx of dollars generate more expectations of stability which cause more money to get in, to counter this effect the BCRA has lower the interest rate by half of what it was 12 months ago, so basically the bcra is doing the opposite role of what you have commented, is trying to keep the peso competitive but as it has as well an inflationary target they cannot shock the market suddenly so they just reduce the interest rate to make less tempting for international money to be invested locally in financial instruments.

The other factor is the interest rate, high interest rate makes the local currency strong, which makes peso strong in this case. The Argentine economy is contracting .. The Macri gov can let loose the dollar rate if they want.

 

[RodalfoWalsh]

The other factor is the interest rate, high interest rate makes the local currency strong, which makes peso strong in this case. The Argentine economy is contracting .. The Macri gov can let loose the dollar rate if they want.

You're flat out mistaken in your take on the economy.BCRA has been cutting interest rates for months. The peso is 'loose' at it's market value except for when the BCRA depresses (NOT props up) its value on the occasions it gets too strong. All of this data is available from the bcra.gov.ar if you want to inform yourself.

 

[UK Man]

Something strange going on in La Anonima this past couple of weeks. I've never seen so many items on offer.

 

[RodalfoWalsh]

In this one you are terrible mistaken, the Bcra is actually buying dollars and not selling them to the market so is true that is not a total free market but in the opposite way as you mention.
The central bank is absorbing dollars from the market not selling them, in other words is actively keeping the local currency cheap lately. The problem of the actual price of the peso has more to do with the local interest rate and the expectation of the market, this two factors dance one around the other, as the expectation of the peso devaluating is low and the interest rate is hight it generates a circuit in which dollars enter in the market to be invested in different financial instruments like lebacs, or bonds and that same influx of dollars generate more expectations of stability which cause more money to get in, to counter this effect the BCRA has lower the interest rate by half of what it was 12 months ago, so basically the bcra is doing the opposite role of what you have commented, is trying to keep the peso competitive but as it has as well an inflationary target they cannot shock the market suddenly so they just reduce the interest rate to make less tempting for international money to be invested locally in financial instruments.

Close but not quite. The strong peso (and to a good degree IMO the recession) is the consequence of the inflation target. We would be much better off it wasn't such a salient political point but that is one campaign promise Macri can't go back on.