Value Of The Usd V.s. The Peso

[el_expatriado]

I'm may be pulling this out of my ass, but it seems obvious to me that the current administration is manipulating the currency to keep the dollar low. In my quite limited understanding of economics, why not? It seems to benefit making this country more stable. Does anyone have a better/rational explanation?

Its actually opposite. The Central Bank of Argentina is BUYING dollars and is preventing the dollar from going lower. They'd actually like the dollar a little higher, around 15 or 16. But that's not going to happen.

Right now with the dollar at 12 we'd be at Cavallo 1:1 levels. For us to be back at 3:1 (2003-2007) during the boom years we'd need to have the dollar at 22-24. So Argentina is really uncompetitive right now. Its almost like the late 90's levels in terms of prices. Remember, Argentina during the 90's was the most expensive country in South America. We are approaching that level of prices and uncompetitiveness.

Saludos.

 

[garryl]

Its actually opposite. The Central Bank of Argentina is BUYING dollars and is preventing the dollar from going lower. They'd actually like the dollar a little higher, around 15 or 16. But that's not going to happen.

Right now with the dollar at 12 we'd be at Cavallo 1:1 levels. For us to be back at 3:1 (2003-2007) during the boom years we'd need to have the dollar at 22-24. So Argentina is really uncompetitive right now. Its almost like the late 90's levels in terms of prices. Remember, Argentina during the 90's was the most expensive country in South America. We are approaching that level of prices and uncompetitiveness.

Saludos.

Yes, the ratio needs to go 24: 1

 

[TrevorCito]

Its actually opposite. The Central Bank of Argentina is BUYING dollars and is preventing the dollar from going lower. They'd actually like the dollar a little higher, around 15 or 16. But that's not going to happen.

Saludos.

I don't get it. If they're buying dollars, why is the Peso going up?

 

[Rich One]

Wait till the Blanqueo goes into effect a flood of dollars??

 

[scotttswan]

I don't get it. If they're buying dollars, why is the Peso going up?

They can't buy enough?

 

[lamarque]

I don't get it. If they're buying dollars, why is the Peso going up?

There are too many dollars arriving to the country, they just cannot buy all of them, that will require printing a hell lot of new pesos so there is no possibility of doing so in this moment, especially if they want to stop inflation. What worries me more is what will happen when the Blanqueo goes into effect, probably a part of the effect is already discounted as people with dollars that saw the Blanqueo coming change the dollars to pesos faster to take full advantage, but surely not the whole of the effect is behind, after all 60 billon dollars is way too much to absorb for the government, one of the mechanism they made is to incentive the people that enter into the Blanqueo to keep that money in dollars or out of the country, still I’m sure greed will push harder and many people will change to pesos and buy bonds and that will push even more down the dollar value in pesos in a moment where all the country’s of the region suffer devaluations of their currencies this is not good.

 

[bobsnowpuppy]

High interest rate causes peso to be strong in short terms, in the long run, either you have to print even more bills, which leads to higher inflation or your economy has to crash like 2001 Argentina.
In the near future, expats with dollars will have to suffer, many locals who do not have the income adjusted to the inflation also will suffer.

But I like this explanation: high interest rate causes strong currency.

Of course you are right. My employer agreed to give me increases that match the inflation here, but has reneged. It goes without saying that I am VERY disappointed and struggling.

 

[rickulivi]

I'm surprised to see how many of you are misunderstanding why the dollar is so low. The reason? Inflation!!!! What would happen if the dollar were selling at, let's say 20 pesos next week? Every business person would raise their prices like crazy, fueling more inflation. So, the magic trick requires been able to devalue the peso without creating inflation. How do you do that? Magicians don't reveal how they make their tricks, so I don't know how to depreciate a currency and not cause an increase in inflation. Well, I'm being a bit too modest. The traditional recipe calls for forcing a tough enough recession that no one dares to raise prices to avoid losing even more sales. At that point you may be able to devalue a currency without causing inflation. There are other ways to devalue without causing inflation, like allowing imports to arrive freely. In sum, devaluing without causing inflation is a tough act. Will Macri b Abo to do it? With his track record, he just might, if a heart attack does not kill him before he can work the magic.

 

[garryl]

I'm surprised to see how many of you are misunderstanding why the dollar is so low. The reason? Inflation!!!! What would happen if the dollar were selling at, let's say 20 pesos next week? Every business person would raise their prices like crazy, fueling more inflation. So, the magic trick requires been able to devalue the peso without creating inflation. How do you do that? Magicians don't reveal how they make their tricks, so I don't know how to depreciate a currency and not cause an increase in inflation. Well, I'm being a bit too modest. The traditional recipe calls for forcing a tough enough recession that no one dares to raise prices to avoid losing even more sales. At that point you may be able to devalue a currency without causing inflation. There are other ways to devalue without causing inflation, like allowing imports to arrive freely. In sum, devaluing without causing inflation is a tough act. Will Macri b Abo to do it? With his track record, he just might, if a heart attack does not kill him before he can work the magic.

Sorry, not sure what you are trying to say.

 

[dennisr]

http://www.iprofesional.com/notas/233622-Los-10-motivos-que-explican-el-retraso-del-tipo-de-cambio-