What do we think will happen with the exchange rate?

[Che1990]

It's been pretty stagnant since mid-October, so we've seen some serious inflation in dollars since, especially in December.

Pretty alarming how pricey things are getting in hard currency, many supermarket and farmacy items costing the same or more than in places like the US and UK etc - we've gone from one extreme to the other.

What do we think will happen with the exchange rate?

They're forecasting another 3-digit inflation figure for this year, do we think Argentina will get expensive again, as it was last in 2016/17?

Or do you think the dollar will shoot up at some point soon?

 

[Quilombo]

I think the following will happen:

• Argentina becomes more expensive in dollars again like in the 1990s and 2016/2017
• Wages continue to decrease both in nominal, and especially in real dollar terms
• Inflation remains high in the double digits; remain on the cusp of hyperinflation (50% a month is the textbook definition)
• Nominal and real interest rates remain negative
• GDP, consumption, and HDI shrink
• Retaliation by the campo for increased withholdings and refusal to devalue, i.e. exporting/liquidating only what's needed to cover costs
• The BCRA either abandons or increases the crawling peg as 2% a month devaluation isn't sustainable
• Cost of living continues to spiral out of control for most Argentines
• Businesses refuse to adjust costs with shrinking demand, simply prefer to not sell; cut off their nose to spite their face

Now, if Milei somehow gets enough dollars to dollarize, all bets are off as to what happens, but I still remain doubtful about this being possible anytime soon, and the above conditions create a negative feedback loop where it becomes more expensive to dollarize the longer one waits to do so, but you have to wait because you don't have enough dollars to dollarize the economy at an acceptable exchange rate.

 

[SinPulgas]

I think the following will happen:

• Argentina becomes more expensive in dollars again like in the 1990s and 2016/2017
• Wages continue to decrease both in nominal, and especially in real dollar terms
• Inflation remains high in the double digits; remain on the cusp of hyperinflation (50% a month is the textbook definition)
• Nominal and real interest rates remain negative
• GDP, consumption, and HDI shrink
• Retaliation by the campo for increased withholdings and refusal to devalue, i.e. exporting/liquidating only what's needed to cover costs
• The BCRA either abandons or increases the crawling peg as 2% a month devaluation isn't sustainable
• Cost of living continues to spiral out of control for most Argentines
• Businesses refuse to adjust costs with shrinking demand, simply prefer to not sell; cut off their nose to spite their face

Now, if Milei somehow gets enough dollars to dollarize, all bets are off as to what happens, but I still remain doubtful about this being possible anytime soon, and the above conditions create a negative feedback loop where it becomes more expensive to dollarize the longer one waits to do so, but you have to wait because you don't have enough dollars to dollarize the economy at an acceptable exchange rate.

I think most of those are reasonable guesses, but we'll see.

I started buying plazos fijos UVA about six weeks ago when I started hearing the inflation estimates for the next few months and possibly beyond. Not a huge amount, but enough to cover my costs in case the dollar doesn't keep up with inflation. As of the other day, they raised the minimum holding time to 6 months, but I bought some maturing in March and April, and today more maturing July 1.

I also bought some tuna, and I bought some wine, and a few other things that I use a lot. After seeing the wine I like jump 50% in one shot at the chino across the street, I went to another chino nearby that hadn't raised the price yet and bought all they had left, 15 bottles. I'm noticing a lot of empty shelves in the local supermarkets as people seem to be doing the same with other products.

 

[Ronnie Hotdogs]

I played golf on Saturday with the new president of Banco Nacion and he didn't seem like he had a care in the world.
Read into that what you will..

 

[SinPulgas]

I played golf on Saturday with the new president of Banco Nacion and he didn't seem like he had a care in the world.
Read into that what you will..

What I read into it is that we travel in different circles.

 

[retiredbanker]

I played golf on Saturday with the new president of Banco Nacion and he didn't seem like he had a care in the world.
Read into that what you will..

Is ignorance bliss?

 

[wrangler]

I think the following will happen:

• Argentina becomes more expensive in dollars again like in the 1990s and 2016/2017
• Wages continue to decrease both in nominal, and especially in real dollar terms
• Inflation remains high in the double digits; remain on the cusp of hyperinflation (50% a month is the textbook definition)
• Nominal and real interest rates remain negative
• GDP, consumption, and HDI shrink
• Retaliation by the campo for increased withholdings and refusal to devalue, i.e. exporting/liquidating only what's needed to cover costs
• The BCRA either abandons or increases the crawling peg as 2% a month devaluation isn't sustainable
• Cost of living continues to spiral out of control for most Argentines
• Businesses refuse to adjust costs with shrinking demand, simply prefer to not sell; cut off their nose to spite their face

Now, if Milei somehow gets enough dollars to dollarize, all bets are off as to what happens, but I still remain doubtful about this being possible anytime soon, and the above conditions create a negative feedback loop where it becomes more expensive to dollarize the longer one waits to do so, but you have to wait because you don't have enough dollars to dollarize the economy at an acceptable exchange rate.

Agree. I highly doubt Milei will be able to get approval to get rid of the peso first of all, let alone the dollars required to dollarize the Argentine economy. Everyone needs to be ready to produce more and save more as well, so you don't have to dip into your savings.

 

[Ronnie Hotdogs]

Is ignorance bliss?

maybe typical Argentine arrogance that they’ll be able to sort it out when no one else can.

 

[sergio]

What I read into it is that we travel in different circles.

I played checkers with Biden yesterday. He didn't have a care in the world.

 

[antipodean]

I do not agree that wages will decrease as have not seen any actual signs of this, on the contrary, and would be watching the union negotiations with the government very closely. The starting point is already an abysmal average wage of around US$300... so highly unlikely to drop further or stay there in the mid-long term (If it did, labor in Argentina would be cheaper than China and only a bit more expensive than Bangladesh ...but at least national manufacturing would have fewer excuses as to why they can't compete globally or create jobs...!)

An important change was announced yesterday taking the limits off of businesses to make domestic USD bank to bank transfers using dollars they buy via MEP to settle domestic payments. This, and the content of the recent DNU, starts to create a scenario where businesses are enabled to transact between themselves in dollars without limit (e.g. setting prices and paying in USD) inside the local banking system, plus as more imports start to trickle in, prices should start to settle in hard currency terms in each market... then as the peso supply starts to "dry up" (with more businesses buying USD via a more expensive - but cheaper than inflation - MEP and the central bank removes those ARS from circulation, against a backdrop of higher and more rapid inflation/devaluation burning up the rest) meaning that by the time some kind dollarization arrives it would hopefully not be at 100.000 to 1 but 50.000 to 1 (ponele) so somehow a "less worse" journey than it could have been.

But rather than trying to crystal-ball the future, better just to pay attention to the news of the day and all the detailed policy changes that are happening every day to see how things are shaping up. The situation is fluid and one must assume prices will stay "expensive" indefinitely until solid facts start to say otherwise.