Time to dump the peso?

[EL_TIGRE_de_Tigre]

But isn't Argentina effectively dollarized anyway? Certainly for big purchases like apartments, houses, cars, and so on. People are only using pesos for small transactions, and rush to convert their spare pesos to Dollars whenever they can.

The mechanics of getting everyone to use Dollars for all transactions are a challenge. Of the countries I know that use Dollars for everyday transactions, Panama and Ecuador are much smaller and it's easier to manage, and Venezuela is a basketcase (more than VEF 400,000 per Dollar now). Getting change is a huge problem (I think almost all the Dollar coins are in Ecuador, 150 million of them, and it's still not enough), and damaged banknotes need to be flown to the US to be replaced. Where's the advantage in doing this?

Frank,

Agree with your point. Real estate and autos are dollarized as that is the norm for how they are bought and sold.

Using the dollar in Argentina or any other country is a challenging exercise on a huge scale that more or less can create stability at the cost of the sovereign government giving up the right to print money and inflate.

Argentina's secret to all this public assistance for the past 50+ years (Since the days or after of Peron more or less) has been built on the ability to spend and inflate.

 

[jblaze5779]

I think the overall message is that Argentina needs to switch to ANY CURRANCY other than the one they have control of. It could be British Pounds or whatever ... Of course the cost of living would go up. The gov can't just print off more Pounds to pay for stuff.

 

[antipodean]

But isn't Argentina effectively dollarized anyway? Certainly for big purchases like apartments, houses, cars, and so on. People are only using pesos for small transactions, and rush to convert their spare pesos to Dollars whenever they can.

The mechanics of getting everyone to use Dollars for all transactions are a challenge. Of the countries I know that use Dollars for everyday transactions, Panama and Ecuador are much smaller and it's easier to manage, and Venezuela is a basketcase (more than VEF 400,000 per Dollar now). Getting change is a huge problem (I think almost all the Dollar coins are in Ecuador, 150 million of them, and it's still not enough), and damaged banknotes need to be flown to the US to be replaced. Where's the advantage in doing this?

Yes and no. The dollar is merely a reference of stability. It is something that the Argentine state does not control and something that traditionally fluctuates very little but is still relatively easy to obtain and spend. If it was not the USD it could be any other stable, external and liquid measure that people trust more than the Argentine state.

If you go to Brazil people think and work almost exclusively in BRL. Australia AUD. Chile CLP. Israel NIS. Colombia COP. Singapore SGD. Thailand THB. etc. etc. etc. Why? Because even though these currencies do fluctuate against other currencies and some have recent histories of steep or even hyper inflation, people currently have confidence that they will still buy roughly the same amount of value when it comes time to spend them inside their respective economies and people are generally free to do what they want with them. Those governments interfere very little in the minutiae of the economy so the likelihood of someone "changing the rules" mid-game is remote. Here, like in say Venezuela, such changes happen like 10 times a week; costs need to increase because the president implemented XYZ policy, a government agency restricted purchases or sales of 123, AFIP introduces another new tax on whatever, or a union imposes a 10% increase on labour costs to show whose boss etc. With such unchecked and unpredictable behaviour of the state, there is no telling how much your pesos will be able to buy next year or even what you will and won't be allowed to do with them. Now imagine not having any idea how much your dollars will be able to buy you next year or what you will and won't be allowed to do with them inside Argentina. Pass me a Xanax.

 

[UK Man]

To be honest if Argentina decided to try the Dollar and the cost of living rose I'd go elsewhere, most likely Poland.

I suspect the cost of living will rise anyway no matter what they do.
The economy has always been a disaster since I started coming here.I don't expect much to change in the future.

 

[antipodean]

En los últimos 139 años, Argentina cambió 5 veces de moneda: por qué podría estar cerca la sexta denominación

La última modificación fue hace 29 años con la convertibilidad 1 a 1 con el dólar cuando se restituyó el peso

www.infobae.com

Just as I was starting to like the animalitos...
Am curious to know if anyone experienced such transitions in the past here in Argentina and can share their memories of it? How were the banknotes and “new” currency introduced? How much time was given for people to change their old notes / currency etc?

 

[camberiu]

If you go to Brazil people think and work almost exclusively in BRL.

Walk into any store in Brazil, of any size, and try to buy something with US dollar bills. Most store workers will think that you are either crazy or trying to run a scam. Most Brazilians have no clue as to what the current exchange rate is, unless if they are planning o travel overseas.

But I am old enough to remember when Brazil had triple and four digits inflation rates. When there were limits on how many dollars one could buy and there was an official rate and a black market rate. When people would venture into dark alleys and exchange their Cruzeiros or Cruzeiros Novos, or Cruzados or whatever the name of the currency was that year for dollars. And then they would hide the dollars inside their mattresses. Brazil also experimented with price controls and corralitos. All with disastrous results. All in all, it was not that different from Argentina.
That is, until 1995, when the Real was implemented. It changed everything. For the first time since the end of the Empire, Brazilians had a real currency. The pun with the name of the new currency was very intentional (Real in Portuguese can mean royal or real).

 

[camberiu]

The economy has always been a disaster since I started coming here.I don't expect much to change in the future.

As you have been witnessing, collapse is a process, not an event.

 

[dilmah]

But isn't Argentina effectively dollarized anyway? Certainly for big purchases like apartments, houses, cars,

It does not matter much in which currency CURRENT prices are nominated.
Normally you can always convert currencies. So at any given moment of time N dollars is X pesos.

What really matters is in which currencies debts, contracts and other FUTURE obligations are nominated.
This is crux of the matter. Because future exchange rate is unknown and nomination in dollars vs. peso translates to different amount to pay in the future.

And hence important tie to judicial system. If there is dispute, will judge honor contract nominated in dollars? Or will it convert obligations to pesos?
That's exactly what happened with cepo/corrallito -- they just converted debts to peso. They didn't honor dollar nomination of debts. They honored peso nomination of debts.

 

[Ceviche]

Walk into any store in Brazil, of any size, and try to buy something with US dollar bills. Most store workers will think that you are either crazy or trying to run a scam. Most Brazilians have no clue as to what the current exchange rate is, unless if they are planning o travel overseas.

100% agree. have traveled to almost every city of Brazil and several times over. never ever heard ANYONE ever ask me for USD.