What is the real value of the peso?

[sergio]

If you could peg the peso to the USD at this point, what do you think a realistic rate would be?

 

[LuckyLuke]

If you could peg the peso to the USD at this point, what do you think a realistic rate would be?

That's an interesting question. We could reasonably assume that the "realistic" rate is blue but the government enforces a crawling peg to contain inflationary effects of it's devaluation. I'm curious if the government would allow a floating peso to freely devalue at any speed once the CEPO is removed without being embarrassed or panicking.

That being said once parity is achieved I don't think the "realistic rate" matters anymore. What matters is what a peso/usd can realistically buy. I would hope it gradually finds an equilibrium somewhere between Chileans flooding the Argentina border to buy anything that's portable (last year) and Argentines flooding the Chilean border to buy anything portable (this year).

But that's probably unlikely as it entirely depends on local demand/supply and import/export restrictions.

 

[Ries]

For-ex is a six trillion dollars a DAY industry. If you think actual business needs that volume to buy and sell real goods, well, I have a bridge for you to buy.
Most for-ex trading is speculative, what I would call gambling.
And its based on there never being a realistic value.
A very conservative view would be 4 trillion a day is being traded based on the dollar being volatile.
Thats a much bigger force than any possible thing the argentine government could do.
Now obviously, the giant for-ex machine doesn’t care that much specifically about Argentina, but most of the trading is done online by sophisticated progams that justlook for the opportunity to make a fraction of a percent.

So the very idea of a realistic value is determined by “ to who” ?
Many very large players profit from change, and, to quote Warren Zevon, they dont care who gets hurt.

 

[ArgentinaVet]

For-ex is a six trillion dollars a DAY industry. If you think actual business needs that volume to buy and sell real goods, well, I have a bridge for you to buy.
Most for-ex trading is speculative, what I would call gambling.
And its based on there never being a realistic value.
A very conservative view would be 4 trillion a day is being traded based on the dollar being volatile.
Thats a much bigger force than any possible thing the argentine government could do.
Now obviously, the giant for-ex machine doesn’t care that much specifically about Argentina, but most of the trading is done online by sophisticated progams that justlook for the opportunity to make a fraction of a percent.

So the very idea of a realistic value is determined by “ to who” ?
Many very large players profit from change, and, to quote Warren Zevon, they dont care who gets hurt.

Worth noting that most forex trading operates at a leverage ratio of 100-500x. So if $6 trillion USD of nominal forex is trading per day, actual capital deployed as collateral on the trades is only $12 billion to $60 billion USD.

 

[Quilombo]

Back of the envelope? Around 2K ARS. Based on inflation since the end of parity I'm guessing 4K ARS per dollar if the devaluation moved in tandem with inflation.

Edit: I asked ChatGPT and it says inflation was around 5,220% between 2001 and Dec 2023, so at least $5,220 ARS per dollar.

 

[SinPulgas]

Back of the envelope? Around 2K ARS. Based on inflation since the end of parity I'm guessing 4K ARS per dollar if the devaluation moved in tandem with inflation.

Edit: I asked ChatGPT and it says inflation was around 5,220% between 2001 and Dec 2023, so at least $5,220 ARS per dollar.

But based on US CPI inflation since 2001, today's US dollar is only worth 56 cents of that 2001 dollar. (Link to CPI inflation calculator below.)

So 5220 * 0.56 = $2993 pesos / dollar, if we only want to compare based on the relative changes in inflation.

But of course there are many other factors.

Finally, it comes down to supply and demand at any given moment. I'm just glad I started preparing for the end of the party 12 years ago.

★ CPI Inflation Calculator

 

[ArgentinaVet]

The question is what is the real value of the peso that allows the Argentine economy to function in a state of equilibrium, keeps exports competitive, disincentives imports, allows the Central Bank to accumulate reserves as a result of positive trade flows, and also makes the government running a fiscal surplus possible.
The next question is how to arrive at that FX rate while also trying squeeze inertial inflation out of the economy.