What is CCL? Why wait to make transfers?

[sneakrnet]

The CCL has nothing to do with inflation.

Nothing could be more obvious.

The dolar CCL (and blue, and MEP) almost never move with inflation. If you are a follower of this thread, you already know that. You wouldn't have felt the double penalty of the terrible inflation here of late, combined with your transfer amounts going down, or going up much less than they should if they were adjusting for that inflation.

In fact, over the years, these things (CCL, etc.) go down (or at least don't go up) for long stretches of time, while the inflation never stops.

Two recent examples (I'll use the blue, because I have a chart with prices, but the others moved percentage-wise relatively closely with the blue):

-- From the end of October, 2020, to early April, 2021, the blue fell more than 28%, and didn't regain what it lost until a year later, at the end of October, 2021
-- From the end of January, 2022, to the middle of April, 2022, the blue fell 12%.

In both these cases (and many, many others similar), inflation, as usual, was raging.

If the CCL (or the others) are to be considered indications of inflation, they must move with inflation, they must correlate with it.
They don't even come close.

 

[jlynch]

The CCL has nothing to do with inflation.

Nothing could be more obvious.

The dolar CCL (and blue, and MEP) almost never move with inflation. If you are a follower of this thread, you already know that. You wouldn't have felt the double penalty of the terrible inflation here of late, combined with your transfer amounts going down, or going up much less than they should if they were adjusting for that inflation.

In fact, over the years, these things (CCL, etc.) go down (or at least don't go up) for long stretches of time, while the inflation never stops.

Two recent examples (I'll use the blue, because I have a chart with prices, but the others moved percentage-wise relatively closely with the blue):

-- From the end of October, 2020, to early April, 2021, the blue fell more than 28%, and didn't regain what it lost until a year later, at the end of October, 2021
-- From the end of January, 2022, to the middle of April, 2022, the blue fell 12%.

In both these cases (and many, many others similar), inflation, as usual, was raging.

If the CCL (or the others) are to be considered indications of inflation, they must move with inflation, they must correlate with it.
They don't even come close.

those peaks you talk about have been described as overshoots in this graph which compares CCL to the money supply.

 

[sneakrnet]

those peaks you talk about have been described as overshoots in this graph which compares CCL to the money supply.
View attachment 8275

They love to talk about "overshooting" and "undershooting" here. When something is always "overshooting" and "undershooting," as the CCL, MEP, and blue are, then there is no correlation. Moreover, this chart is not measuring the purchasing power of the dollar (effects of inflation in foreign currency terms) over time, it's comparing the CCL to the money supply in the country.

The constant, great fluctuations up and down in the dollar (call them overshooting and undershooting if you will), combined with the steady movement of inflation always in only one direction, make the CCL an unsuitable indicator of inflation. How could it be? For expats, for long stretches of time, things are very cheap here (in dollars, euros, etc), and then for long stretches of time, prices rise at an incredible pace (Argentine inflation plus dollar "inflation"). I've been here since 2004, and for me, I've experienced these waves many, many times.

It has occurred to me in the middle of writing this that we're all throwing around this term "inflation" very loosely. Argentine inflation (if you believe the INDEC) is easily defined and measured. I think what we are all talking about is "expat inflation," which is a very different thing. It's certainly the thing I've been talking about, especially in the previous paragraph, and it also includes "deflation," with prices sometimes going down, sometimes sharply, and it includes why we experience these waves of exaggerated prices as our currencies are alternately overvalued or undervalued (overshot and undershot, if you will). When things are good for us here (financially), they tend to be very good, and when they get tight, they seem much tighter than they should (even if you do have money sufficient to weather the down cycles, you still "feel the tightness" -- you know that things are not like they were "some months ago").

I know I've gone a little far afield here, but I think we can use the chart (along with our knowledge of Argentina) to know what to expect for our "expat inflation." Besides the unexpected, of course. If you look at the chart, you'll notice that the big jumps in the CCL correspond to times of big policy errors by the government, shortages of dollars, and terrible uncertainty for the future, all staples of life in Argentina. These jumps are usually exaggerated by the fact that Peronista governments (in particular) like to keep the peso strong, undervaluing foreign currency, to try to make the people feel like they have more money and that things are better than they are, so when the CCL jumps, it jumps. In these moments, for us, prices of everything drop and we have that sudden feeling of prosperity. We enjoy it for a while, but we know it won't last. Time and inflation immediately begin to erode that prosperity, and you start to feel that tightness again around the edges.

That is, until the next jump.

 

[Diego EEUU (Jim)]

My understanding is as follows: CCL is what you get buying bonds that are traded in New York and Buenos Aires using dollars in New York, then holding the bonds a very few days to satisfy rules as to this being buying and selling investments distinguished from a pure money changing transaction, then transferring them to a Buenos Aires brokerage account, and then selling them for pesos here. Someone correct me if that is wrong and if they really track how the CCL works; I do not use that system. To me, it is a thusly a supply and demand based free market peso-dollar conversion ..... but an imperfect one for various reasons including the hassle of holding and moving bonds, and the possible exclusion of what would the big market players (public companies) from the system to the extent they are banned from so trading in bonds.
As to inflation, it will impact CCL over the long haul, as it impacts all currency exchange situations. But many other factors (short term demand; government policy; anticipation as to future inflation and economic strength) also impact foreign currency exchange rate changes. So yes, as sneakrnet notes, there are interim periods in which inflation is raging in Argentina but the CCL and blue rates fall. But over the long haul, inflation will positively correlate with CCL and Blue changes, so I respectfully disagree with the conclusion that "CCL has nothing to do with inflation."

 

[sneakrnet]

My understanding is as follows: CCL is what you get buying bonds that are traded in New York and Buenos Aires using dollars in New York, then holding the bonds a very few days to satisfy rules as to this being buying and selling investments distinguished from a pure money changing transaction, then transferring them to a Buenos Aires brokerage account, and then selling them for pesos here. Someone correct me if that is wrong and if they really track how the CCL works; I do not use that system. To me, it is a thusly a supply and demand based free market peso-dollar conversion ..... but an imperfect one for various reasons including the hassle of holding and moving bonds, and the possible exclusion of what would the big market players (public companies) from the system to the extent they are banned from so trading in bonds.
As to inflation, it will impact CCL over the long haul, as it impacts all currency exchange situations. But many other factors (short term demand; government policy; anticipation as to future inflation and economic strength) also impact foreign currency exchange rate changes. So yes, as sneakrnet notes, there are interim periods in which inflation is raging in Argentina but the CCL and blue rates fall. But over the long haul, inflation will positively correlate with CCL and Blue changes, so I respectfully disagree with the conclusion that "CCL has nothing to do with inflation."

You can respectfully disagree, but that doesn't change the facts. The CCL increases because of the constant devaluation of the peso and the deterioration of the Argentine economy, not because of inflation. Sometimes prices of items in dollars correlate with what prices were fifteen years ago, and sometimes they are wildly different. Where's the correlation? Which values do you use to compare? In 2004, I could buy a good quality bottle of wine for about US$4.00. In October, 2020, I could buy a similar bottle for US$2.00. Today, a similar bottle costs US$6.00. The values change constantly, and by very large amounts.

Where's the correlation?

 

[sneakrnet]

Contado con liquidación (CCL)

Setting aside the government's various attempts to manipulate the CCL from time to time, it is a very simple concept. You take something that is bought and sold in pesos and dollars, and you simultaneously buy that thing in one currency, and you sell it in the other. In this case we're talking about stocks and (mostly) bonds that trade in Buenos Aires in pesos and trade in New York in dollars.

Suppose you want to convert pesos to dollars. Suppose YPF (the Argentine oil company) is selling for 200 pesos a share in Buenos Aires, and it is trading for 1 dollar a share in New York. If you simultaneously buy a share in Buenos Aires and sell it in New York, you have just converted 200 pesos into 1 dollar. By doing the opposite, you can convert 1 dollar into 200 pesos.

In this example, we would say that the CCL is 200. It is as simple as that. If suddenly the price in Buenos Aires for YPF goes up to 250 while the price in New York stays at 1 dollar, the CCL goes up to 250.

Since many people here watch the CCL, it is important to note that the quotations for the CCL in the newspapers don't pay any attention to any rules imposed by the government about holding periods for securities (as Jim alluded to above). They simply calculate the price of the CCL as if there were no holding periods (creating a fictional CCL that can't exist in practice, but still useful as a number to indicate the current "temperature" of the market, although that price may not actually be attainable).

It's also important to note that any stock or bond that trades in pesos here and dollars in NY can be used to do the CCL calculation, meaning that there can be many different numbers for the CCL at exactly the same time, and that different newspapers use different securities to calculate the CCL, which is one of the reasons that you will see varying numbers for the CCL depending on where you look.

There's more to the story, but this is getting long. I'll just note that you may have noticed some months back that for a while, the government was restricting part of the "CCL operation" but not all, allowing private third parties to make their own deals (for more information you can investigate something called Senebi). You may remember that for some months, Western Union was paying considerably more that the quoted price of the CCL. They surely weren't giving us a great discount because they love us so much. They had to be involved in those private deals and getting much more than the quoted price.

Finally, imagine Apple being used for CCL. Hard to believe? Here's a quote talking about a comparison between the CCL calculated using Apple and the CCL calculated using the Argentine bond AL30.

Por ejemplo, el CCL que se lleva a cabo a partir del Cedear de Apple cuesta $ 178,57, contra un CCL de AL30 por encima de los $ 171.

Source: https://www.cronista.com/finanzas-m...dujo-la-brecha-entre-los-dolares-financieros/

Not all CCLs are created equal.

 

[AxelM]

As a complete beginner expat in BA, I wanted to ask if anyone could explain what the CCL is and how can I understand it better. To give you some background, my wife (who is Argentine) and I, moved here a month ago, to live permanently and occasionally visit back to the U.S. I'm trying my best to educate myself on everything I can currency-related and economy-related that an expat should know but it's hard to do so surfing countless threads and picking out relevant info. Can anyone please help give me a crash course on everything I need to know? Like what is the CCL? Why is Guzman resigning a sign that we should wait to make any transfers? Would appreciate it a lot! Thank you!

 

[Quilombo]

As a complete beginner expat in BA, I wanted to ask if anyone could explain what the CCL is and how can I understand it better. To give you some background, my wife (who is Argentine) and I, moved here a month ago, to live permanently and occasionally visit back to the U.S. I'm trying my best to educate myself on everything I can currency-related and economy-related that an expat should know but it's hard to do so surfing countless threads and picking out relevant info. Can anyone please help give me a crash course on everything I need to know? Like what is the CCL? Why is Guzman resigning a sign that we should wait to make any transfers? Would appreciate it a lot! Thank you!

What is the CCL, or Contado con Liqui?

For our purposes, we'll use USD to ARS since you're wanting pesos and you have dollars.

Basically it's a transaction in which dual listed securities, such as Bonar bonds for example, are purchased in the United States via a US broker with US Dollars from the United States, you then transfer said securities from your US broker to your Argentine broker, and you resell them within the domestic Argentine securities market for pesos which are transferred to your Argentine bank account.

Why go through the hassle of having to have 2 bank accounts and 2 brokerage accounts?

It's generally been the best way to legally pesify your dollars at the true exchange rate, since unlike interbank transfers, the value of the securities in dollars and pesos are market determined, i.e. they don't use the fake (BCRA/Official) exchange rate to determine the value of the dollar.

Is this an Argentine specific thing?

No, in Canada, the other case I'm aware of, this is called Norbert's Gambit and it too is used a method to safely, legally, and at a greatly reduced fee exchange CAD for USD, while also requiring you to have both a US and Canadian brokerage account.

Why is Guzman resigning a sign that we should wait to make any transfers?

Guzman was in a thankless position as many of us have said; of everyone on the K bandwagon, he was the person the markets (domestic and foreign) and the IMF hated the least. I wouldn't say they trusted him per se, they just saw him as the least detached from reality, which gave him credibility since he acknowledged there were fundamental, structural problems that needed to be addressed in order for Argentina to have some form stability economically long term, and was willing to try and stick to a program to rectify these things.

All this being said, he lost the internal battle against the Ks, most notably Cristina and the Campora (Maximo) who hate him, followed by others such as undersecretaries in the Ministry of Energy who didn't want to reduce energy subsidies, and Miguel Pesce, the BCRA President who he had another new conflict earlier this week with over the interest rates paid on peso denominated debt.

Because of this, it seems to the market (and I would argue accurately so) that Cristina/the Campora have won the internal, Alberto has been revealed to be a paper tiger that doesn't even control his own cabinet because no matter what he said about how much he trusted/had faith in Guzman and "the plans" (it was mostly words anyways) he couldn't stop Cristina and the hard Ks from constantly attacking him which undermined Guzman constantly whenever he tried to act. This weekend was some Peronist act with Cristina basically shitting all over Guzman and Alberto indirectly, and that was enough for him to say "Fine, it's your funeral" and quit.

All this is to say the market has zero faith in Cristina and the hard Ks, we all remember her second term, and since they won and pushed Guzman out, there's going to be an adjustment to this exchange rate wise as they price such a victory in. This happens because it forces the country's risk assessment even higher, encourages a further sell off of Argentine bonds, and incentivizes both regular Argentines and businesses to flee to dollars for security as we have no idea what new measures will be taken, but the signal is more of the same K mismanagement we've seen time and time again.

Long story short:

Argentina, the only country whose economy minister resigned due to the country "growing a lot" as Alberto put it earlier this week.

 

[jbeas176]

commerical credit line. used by the IMF. whew . thought i would never understand another acronym