Theories on why Dollar is Strengthing vs Peso

[soulskier]

In yesterday's Herald columnist Martin Gambarotta wrote: "The government is under extreme pressure from business leaders and farm lobbies to devalue the peso drastically - especially because neighboring Brazil's currency has depreciated roughly forty percent overnight because of the bust..."

Since when has Cristina and Nestor bowed to anyones desires? I totally agree with the business leaders however!

 

[Grazie]

Bloomberg article stated that there will be a one-time devaluation of the Arg.Peso (16% value decrease bringing it to 3.80 peso to A US dollar) and that the Banco Central of Argentina is strongly considering this move. The Arg. reserve of dollars have gone down 4B since March of 08. We have to wait and see what Santa will bring this Christmas, I suppose.

 

[perry]

Bloomberg articles in the past have been wrong as most articles by international financiers as well.

Im sure that we all have heard about Lehman Bros who were predicting with glee that Argentina would collapse this year. Its strange that they did not predict their own collapse

 

[sergio]

Pericles, Lehman didn't predict their own demise because it would not have been in the interest of the big wigs who ran the company. Anyway, as for the decline of the peso....I don't think anyone has the answer however it seems to me that a lot of people will benefit from a high dollar: the tourist industry, the real estate industry, Americans living in Argentina on dollars, etc.

 

[nikad]

Pericles, Lehman didn't predict their own demise because it would not have been in the interest of the big wigs who ran the company. Anyway, as for the decline of the peso....I don't think anyone has the answer however it seems to me that a lot of people will benefit from a high dollar: the tourist industry, the real estate industry, Americans living in Argentina on dollars, etc.

Except for the low and middle class working Argentines... The industry is asking for a dollar rate as high as possible to keep their profit margins, otherwise they will have to reduce personnel, however, this is an old story in this country: the dollar goes high, the prices go high as well, I have never witnessed a high dollar without a lot of inflation here. As per the real estate industry, it might look a bit more attractive for investors, but not for the average citizen, that already suffers with a 1:3 dollar/peso ratio. The tourism industry wil benefit, however salaries for those working within it won´t be increased most likely, and everything will be dearer to pay for. Expats on dollars, business owners will benefit possibly.

 

[bigbadwolf]

Anyway, as for the decline of the peso....I don't think anyone has the answer however it seems to me that a lot of people will benefit from a high dollar: the tourist industry, the real estate industry, Americans living in Argentina on dollars, etc.

Given the high rate of inflation that has prevailed in Argentina over the last couple of years (and which has been discussed at length on this forum), it is inevitable that a devaluation -- official or otherwise -- shortly take place. Otherwise the country will be unable to compete in the international arena: exports and tourism will both suffer.

 

[soulskier]

As a lucky and thankful person that is able to earn dollars and live on pesos, I feel bad for the common Argentine folk that don't have that option. Not sure what the solution is, but wanted to state I feel for the locals. Some of our Argie friends here are talking about working in Europe this summer to earn 4 to 1.

 

[sergio]

Bigbadwolf has confirmed what I said - and what I stated earlier. What is happening now is a mini-devaluation. The reality is that the country is dependent on exports. To be competitive, the peso must be devalued. Tourism, also important, will benefit. Sales of property and land to foreigners will benefit. I don't know if this devaluation will hurt middle class people as much as someone said here. A moribund economy due to inflation and increasing difficulty in exporting - compounded by a worldwide economic downturn - would seem worse.

 

[tangobob]

Bigbadwolf has confirmed what I said - and what I stated earlier. What is happening now is a mini-devaluation. The reality is that the country is dependent on exports. To be competitive, the peso must be devalued. Tourism, also important, will benefit. Sales of property and land to foreigners will benefit. I don't know if this devaluation will hurt middle class people as much as someone said here. A moribund economy due to inflation and increasing difficulty in exporting - compounded by a worldwide economic downturn - would seem worse.

While I agree with most of what is said here, I must question one point; How will devaluation benefit property sales when all property sales are done in US dollars?

 

[bigbadwolf]

While I agree with most of what is said here, I must question one point; How will devaluation benefit property sales when all property sales are done in US dollars?

Probably what Sergio means is that tourism and immigration will get a fillip from a devalued peso (because it will mitigate the cost of living in Argentina) and thus this will have a positive impact on property sales (and hence on dollar prices).