They're Coming For Your Dolar Blue Next!

[French jurist]

Yes, the article refers rather to the tourists coming here from abroad. But likely the other "dolar turista" (Argentines spending abroad) will receive its own treatment.

If the will to slow down on printing pesos becomes a reality, the dolar cueva won't go up as quickly as before.

Anyway, for those living here on dollars, that's rather a "problem of the rich"...

 

[nicoenarg]

If the will to slow down on printing pesos becomes a reality, the dolar cueva won't go up as quickly as before.

Although I think the slowing down on printing of pesos is as likely as successful Botox treatment on Cristina's face.

 

[ghost]

Doing all of this stupid shit until you have to wear glasses won't make it go away when you're blind.

 

[dennisr]

Based on this quote:



I am under the impression that when they talk about tourist exchange rate, they are talking about foreigners coming into the country and buying pesos with their dollars at higher rates in the blue market. Or am I wrong?

My post was not referring to any particular news article and you are not wrong. It all gets confusing using the term "tourist dollar: coming or going. Indeed, the idea of having a tourist exchange rate for tourists arriving in Argentina has been talked about. It would have to be very attractive to make it work. Maybe I am full of it, but do not see it working. Until there is a loosening of the treasury's purse strings of us dollars for Argentines, the demand shall remain and keep the underground market alive, I THINK HA HA. Who really knows what dog and pony program the brain trust can come up with. I ragged on Moreno as much as anyone, but he sure made my life sweeter: blue dollar. Maybe I will miss him.

 

[khairyexpat]

I am really at a loss, appreciate if any one can explain to me in SIMPLE terms what is the official rate? What does it mean? Where does it come from? What tourists got to do with it ? (Tourists are a drop in the ocean, No? How much could tourists influence the Argentinean GDP ?)

I understand that if one buys a barrel of oil for $100US you need to pay $1000ARS for the same thing. If an ounce of gold is $1500US you need $15000ARS for the same ounce, etc etc...
This simply tells me that: $1US=$10ARS. This I can understand. It is a world wide exchange rate. And it applies even LOCALLY (I mean an ounce of gold inside Argentina is still going to be $15000ARS, isn't it?)

I have no economic or financial background (and I understand that things could be more complicated than my simple statement).

Very much appreciate any sort of explanation of official rate: $1US=$5.6ARS.
Aside from Argentina trying to impose it here locally on tourists and natives, where else in the world does it have any meaning? Really don't get what are they trying to do !!!! What does this official rate help solve? How? What is the idea?

 

[internationalguy]

Oh boy...

Well, I'll try to keep it as simple as possible. What you described as 1 USD- 10 ARS and it applies to everything would be the case if Argentina were like any other of the 180 other countries around the world without foreign currency restrictions (there are about 20 that do). Since you live in the land of "If it's complicated, let's make it even more", here you can't actually buy any foreign currency, unless you have the government approval. That rate is 1- 6. When Argentine CC holders make foreign purchases they are getting that rate but the government adds the 20% because in a way they are admitting that there is a blue rate and they don't want the difference to be THAT big. Why don't they want it to be that big? Because since private citizens can't legally make dollar transactions.

Every foreign currency transaction that is done legally has to go through the Argentina Central Bank and they are losing their dollars fast. That happens when imports are larger than exports and when the dollars that the BCRA is paying other people (credit card companies and legal dollar purchases) exceed those that are being sold to them. Basically, all Argentines who get permission to buy dollars or de facto buy them with their credit cards are only TAKING from the Central Banks reserves and they aren't putting back a dime, since it would require that they sell the dollars they may have and no one will do that. What the blue dollar does is create a parallel economy If that economy gets out of control it affects everyone. The government tries to hide some of the facts. Like the real rate of inflation, they refuse a devaluation of the currency because it would not be popular. Essentially they don't recognize the real rate of inflation which should in a way affect the real exchange rate. You end up with a disadvantage for people who export and an advantage for people who import, who also have to go through the central bank to pay for those imports because a Chinese manufacturer doesn't want pesos. You end up with a lot of crazy things like many different rates. The government has an import rate, an export rate (in which they kind of boost the amount of pesos exports get), the blue rate, the credit card rate (official + 20%). You also have the official rate which is the fairy tale the government tries to sell. Very few get that rate. The bottom line is, when governments want to sell pipe dreams, they have to pay for them. That's how the debt in America got so high, that's how Argentina's economy crashes ever so often, and that's how Europeans countries who were living beyond their means got into so much trouble. When a government prints so much money that has nothing backing it, it simply loses meaning and becomes worthless.

 

[sesamosinsal]

Just a few things to add to that previous post -- a devaluation would be unpopular because it is inflation. So, if they did a rapid devaluation, we'd be back in 2002. That's what is unpopular. Currently, the policy has been to gradually devalue, although that gradual devaluation has picked up some speed since 2011, I'd say. I am assuming that the President wasn't so much of a fan of this policy because it is a tacit recognition that a devaluation is necessary, despite her declarations that there wouldn't be a devaluation on her watch. Marco del Pont advocated this plan of action, as have other K economists such as Alfredo Zaiat, a frequent contributor on 678 and other K-friendly programs.

Also, I'd like to clarify that the Argentine trade balance has been in surplus territory ever since the Kirchners came into power. They refuse to allow that thing to go into deficit territory.

The USD problems are more visible in the current account, which hit deficit territory for the first time (during kirchnerismo) in 2010sh. I think the reason for people buying dollars is pretty obvious. It's a supply and demand issue. The government cannot expect to print ARS by the billions, throw it into public circulation, and expect it to not have some effect on demand for USD, thus USD supply, and thus it's price.

The real question is: Is demand for any fiat currency (as a hedge against inflation) rational at this point? Is fiat currency a good store for value? ... You won't hear that debate in the Argentine media because it deflects from the political manipulation that they are all engaged in.

 

[Jaredberryman]

As long as they don't make real reforms and redo the whole economic and political system, any measures are just going to be short term and ineffective. Argentina has done the same thing always by trying to regulate their currency constantly. The results have ALWAYS ended in disaster in the short and long term. You can't just keep using smoke and mirrors. All these measures will eventually explode in people's faces sooner or later.

 

[khairyexpat]

Thank you very much International, Bradly and Tex for helping me out..

OK. May be I did not articulate my question precisely.
I was not trying to criticize what they are doing.

Simply I just wanted to understand their theory. I am absolutely sure Argentinean Central Bank, Minister of Finance, Minister of Economy (the best and the brightest) must have sincerely thought long and hard to come up with this strategy thinking they are up to something good that will be beneficial to Argentina, by having this official rate.

(for me .. official rate=fake rate ... no one in the whole world would sell gold or oil or any things else @ official rate)

Every country in the world manipulates its own currency for its own benefit, and this is Argentinean way of manipulating its ARS. Only I don't understand what is the basis of this strategy. I am not asking if it is a good strategy or a bad strategy.

I am only curious to know in their theory (IDEALLY) how could it have worked out to benefit Argentina?

You mentioned that NOT HAVING official rate WOULD NOT BE POPULAR, but this can't be all there is to it.


Tangent questions:
1. Tourists are insignificant fraction of Argentinean economy, how could they be part of the problem or the solution?
2. What is a fiat currency? Are you referring to U$S ?

 

[dennisr]

AR pesos are a non convertible currency which basically means the government pulls a number out of their ass (official rate of exchange) so they can obtain as many us dollars as possible on the cheap. Official rate is one big fairy tale and because it is a fairy tale, a million pesos will not buy you shit outside Argentina, no oil, no gold. So, since the Argentine government cannot print us dollars to buy stuff they desperately need, dollars are in short supply. Shortages create black FX markets: blue rate, unofficial rate of exchange, parallel market......