What Would Dollarization Mean for Expats?

[earlyretirement]

That's the other elephant in the room, at what rate? Assuming we could even get loaned 40 Billion+, dollarization via that loan assumes the current blue rate more or less, but if Milei wins, there's also the following hurdles:

- There will be even more upward pressure if Milei comes in first or makes it to the ballotage
- It's a long time between October 22, the ballotage, and December 10th
- The dollar blue will not stay frozen at ~$720 until he becomes president if he wins
- Reality will also sink in as people realize we don't have anyone to lend us 40 Billion, let alone 50, 60, etc. to dollarize at under 1,000 pesos per dollar, and this could create a feedback loop driving the value of the exchange rate up
- Even if we somehow manage to get 40 Billion Dollars, it's not as simple as waiting for a SWIFT transfer, you need the cash. Argentina is a very cash centric society in pesos, and almost exclusively so in dollars. Even with Milei as president, do you think anyone here will want to keep their dollars in the bank? Once bitten twice shy, and it was barely 20 years ago.
- The dollars we have here are also disproportionately $100 bills, not great for buying a single alfajor with
- Logistically this will be fun, especially as we will need $1, $2, $10, and $20 bills mostly. This is what transporting $40 billion USD to Iraq was like, logistically, not to mention the bundles that will naturally "go missing" along the way here at Ezeiza like they did in Iraq, even under US Army/Marine supervision
- What's the plan for coins? Are there any left? Haven't people been selling them to scrap yards by the pound for the last few years? Now we'll have to mint coins in a sort of hybrid currency like Ecuador does, and that isn't something that happens overnight.
- The longer this takes, the more macro economic distortions will happen. You better believe the market and people will stop accepting pesos for most things before December 10th if Milei wins, I sure as shit will, I don't want to be left holding the bag with colorful toilet paper

I am confident the people supporting Milei have not through the logistics of this, and the impact it will have short term. I'm in my early 30s and have had the pleasure of knowing several older Argentines who have told me stories of life during the assorted currency panics and changes. You know what none of them said? "It was a smooth processes". And that was when most of the government and society was onboard with the change, unlike now, where 30%+ of people don't support this.

SPOT on target. This is the point I've been making. I do think Milei is great for Argentina and will vote for him. Argentina needs a change but his supporters need to get realistic about a lot of stuff. Most when I ask them for the plan how this will be done, they spout fantasies of it slowly being done and financial markets participating, bonds, etc.

But the reality is Argentines don't have faith in the banking system. Even if he does an amnesty that gets billions upon billions flowing back into Argentina, this will take time. And also the Argentines that have the billions abroad or under their mattress will be less likely to do it because they know the government keeps saying, "last chance".

He can put some pressure on them with the plan of the AFIP and IRS to share all information by 2025. But I think even that will get extended. Still, that is his best shot. He has to put the scare in people with all those funds abroad and say he is going to push for the sharing of information with the IRS and tax entities around the world. And unless they bring it back to Argentina and pay 0% tax or penalties, then it will get heavily fined and taxed. JMHO.

If it's one thing wealthy Argentines are scared of is the threat that all their asserts abroad will be discovered.

I think many of the youth following him are very naive and think that all the problems of Argentina will end overnight. It won't and most likely will get more painful before it gets better. But I think many of his ideas like cutting spending and cutting governmental size and red tape are good. That's a start. If I were him, I'd go more the approach of I'm going to do X, Y, Z over the next 12,24,36 months. Make a roadmap of REALISTIC things he wants to do. Then he can say I laid out my plan and the other party didn't let me. Give me a chance and then if this works I want to do X.

Yes, I get he wants to get people fired up to get elected but I'd argue. Then what? He has to have some realistic plan in place instead of threatening to blow everything up. Give objective and targeted goals and measures and appeal to work with the other side as well as IMF, other countries, etc. Be logical and methodical. That's the best route.

 

[TWB103]

It doesn't really matter if Argentina has ever had a 'Socialist' or 'Marxist' government by name.

Whatever a political system is called it's how the system actually works (or doesn't) and how the populace are affected that matters. In effect it is more a centrally planned economy than free market.

Argentina is not a centre left, South American Sweden and is increasingly closer to Cuba economically and politically. For which many see Milei as the solution.

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Heritage.org

Argentina’s economic freedom score is 51.0, making its economy the 144th freest in the 2023 Index. Its score is essentially unchanged from last year. Argentina is ranked 27th among 32 countries in the Americas region, and its overall score is below the regional and world averages.

Aggravated by corruption and political interference, the lack of judicial independence has severely eroded limits on government. Leftist spending measures and price controls distort markets, and government interference still hobbles the financial sector. Fading confidence in the government’s determination to promote or even sustain open markets has discouraged entrepreneurship.

These zombie arguments keep coming back... about how "Argentina is socialist", when in fact it never has been, and "never mind the terminology, it really is socialist" . And now how Argentina is "closer to Cuba economically and politically" Is this the "fill the zone with shit" Steve Bannon argument? WTF?

If you'd bothered to do any checking on the subject, rather than just regurgitate some low quality Heritage screed ("Leftist spending measures"? Really? They don't even make an attempt at serious analysis), you'd see that Argentina scores highly in political and personal freedom. See Freedom House (https://freedomhouse.org/country/argentina/freedom-world/2021) for example, or Legatum (https://www.prosperity.com/globe/argentina):

View attachment 9024

And what's with the demonization of socialism anyway? In the UK, the Labour Party (socialist in name, at least) is a government in waiting, and the financial markets are entirely untroubled. The Labour government after the divisiveness of the Thatcher years was initially a very welcome change. I lived in Germany when Gerhard Schröder's socialist party won power after the stagnation and corruption of the conservative Kohl years. His government was a welcome breath of fresh air, lowering taxes and reforming the social security system.

By "tarring" someone or some group with the socialist tag you're saying more about yourself than about your topic.
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Feel free to ignore my posts in the future.

 

[FrankPintor]

Yeah that's why many Canadians want the hell out of their country. Most of my Canadian friends are getting to the point they want out. Many of them are getting permanent residency in Mexico and buying places down there. Just go to a town like Chapala or Ajijic or Puerto Vallarta or many others. Every time I go I see more Canadians.

Canadians are some of the gentlest, nicest people I know but now they are talking shit about their country. For good reason.

You're confident that they're leaving Canada because it's becoming more socialist? And Mexico is what, exactly? Its president is described as "center-left, progressive, populist, and economic nationalist",

In parallel with this, it seems US Americans are leaving the US, and they're going to Europe, so they're not exactly fleeing socialism: https://web.archive.org/web/2023090.../28/why-europe-is-a-magnet-for-more-americans

They give some examples of people's experiences in the US: "Stanley had a cross burned on his lawn while growing up in Virginia. Several of Sylvia’s relatives were killed by guns".

'Now [US Americans] are aware that Europe has its advantages: “Good health care, better transportation, less gun violence, there’s racism but a lot less deadly.”' Maybe if we stay quiet down here they won't notice Argentina and leave us alone

 

[PatriotsFan]

Maybe if we stay quiet down here they won't notice Argentina and leave us alone

I certainly hope so

 

[Agribotics]

Argentina isn't socialist. Venezuela is socialist.

In the 1950s, Venezuela was the fourth wealthiest country in the world. Today, Venezuela is poorer than it was prior to the 1920s, its infrastructure is deteriorating, and its economy has been shrinking since the turn of the century. Hyperinflation (out of control price increases) has left the currency worthless and made it almost impossible for Venezuelans to afford basic necessities. Millions have fled the country’s inhospitable conditions. How did the country go from having a GDP on par with that of the United States, New Zealand, and Switzerland to having almost 90% of the population living in poverty?

The United Socialist Party of Venezuela (Spanish: Partido Socialista Unido de Venezuela, PSUV) is a left-wing to far-left socialist political party which has been the ruling party of Venezuela since 2010. It was formed from a merger of some of the political and social forces that support the Bolivarian Revolution led by President Hugo Chávez.​

The party is constituted as a socialist party, and affirms that a socialist society is the only alternative to overcome the capitalist system. It assumes as ideological sources the thoughts and works of Simón Bolívar, Simón Rodríguez and Ezequiel Zamora. The party values in the same way the principles of scientific socialism, Christianity, liberation theology, all critical and humanist universal thought, gender equity and equality, and the ethical obligation to build a [political] model respectful of life and mother Earth that guarantees human survival.

As a multiethnic and diverse party, it nurtures its roots of Afro-Indianism bequeathed by Guaicaipuro and José Leonardo Chirino, all inspired by the fundamental leadership and revolutionary ideas of Commander Hugo Chávez, aimed at creating the new man and woman in a melting pot of hopes and dreams that make our socialism a mestizo socialism, loaded with Africanity, the elements of the indigenous peoples, and with the international vision that has had Francisco de Miranda as its greatest proponent.

 

[dave111]

I don't know about Expats, but it would be terrible for Exports

 

[earlyretirement]

You're confident that they're leaving Canada because it's becoming more socialist? And Mexico is what, exactly? Its president is described as "center-left, progressive, populist, and economic nationalist",

In parallel with this, it seems US Americans are leaving the US, and they're going to Europe, so they're not exactly fleeing socialism: https://web.archive.org/web/2023090.../28/why-europe-is-a-magnet-for-more-americans

They give some examples of people's experiences in the US: "Stanley had a cross burned on his lawn while growing up in Virginia. Several of Sylvia’s relatives were killed by guns".

'Now [US Americans] are aware that Europe has its advantages: “Good health care, better transportation, less gun violence, there’s racism but a lot less deadly.”' Maybe if we stay quiet down here they won't notice Argentina and leave us alone

I never said Mexico wasn't to the left. But at least there it's 1/3 of the cost! Ha.

 

[FrankPintor]

I never said Mexico wasn't to the left. But at least there it's 1/3 of the cost! Ha.

Seems like a sensible prioritization of concerns..

I've been curious about something, it doesn't have anything directly to do with the discussion here, but since you have friends in Spain maybe you have some insight: as you say, many Argentinians have migrated to Spain, and I've heard that they're heartily despised by native Spanish, since, rather than adapt to their host country, they brought the habits that helped make Argentina what it is: laziness, entitlement, dishonesty, not paying debts, fulfilling contracts, and skipping out on apartment rentals leaving money owing.

I've heard the same with regard to Israel, of all of their enormous diaspora, the one held in least regard is the Argentinian one, for the same reasons I listed above.

 

[earlyretirement]

Seems like a sensible prioritization of concerns..

I've been curious about something, it doesn't have anything directly to do with the discussion here, but since you have friends in Spain maybe you have some insight: as you say, many Argentinians have migrated to Spain, and I've heard that they're heartily despised by native Spanish, since, rather than adapt to their host country, they brought the habits that helped make Argentina what it is: laziness, entitlement, dishonesty, not paying debts, fulfilling contracts, and skipping out on apartment rentals leaving money owing.

I've heard the same with regard to Israel, of all of their enormous diaspora, the one held in least regard is the Argentinian one, for the same reasons I listed above.

Actually I haven't heard of any issues from my friends that moved to Malaga. Many, many live there. And those traits that you are talking about you have to remember the reason Argentines are like that in the first place is 80% of them are originally from Spain and Italy. I always joked they inherited those things from their grandparents.

I haven't heard of these kind of issues with the Argentines that are moving abroad. I hope not. But Argentines were never really looked at too well but much of the world. Especially Latin America. Why? Because during the 1:1 days when their currency was strong, I guess they were traveling all over the world and thought they were better than their fellow South Americans.

I think may Argentines have the attitude "I'm not South American". My grandma was from Spain! Or Italy! They tend to look down on others from their same continent.

 

[FrankPintor]

Fuel (gasoline, diesel, jet fuel, natural gas) is still priced at the official rate as are medicines and other medical products. Auto parts that going into vehicles manufactured inside Argentina are also priced at the official rate.

Good data points.

Fuel is sold all over the world at whatever price is determined by governments, I think in Europe something like 80% of the price you pay at the pump is tax. Argentina produces its fuel, so it can sell for whatever price it wants.

Medicine I don't knw much about, other than that it's generally subsidized. I don't know how important that sector is.

Auto and parts exports apparently make up about 10% of the total. Argentina exports mainly agri products, at least 30-40% of the total, and sold for semi free-market prices.

For imports we pay the Blue rate on everything already. If not directly, once you add on taxes it's close.

My point is that a lot, if not most, of the heavy lifting to bring Argentina close to a free market exchange rate has already been done.