Economy Argentina's Milei Devalues Peso by 54% in First Batch of Shock Measures - Bloomberg

[bar_00]

The cepo, unlike the period from 2015-2019, still stands. Consequently, the blue dollar persists and is likely to increase in prominence. The MEP/CCL dollar, along with the blue dollar, remains the sole accessible currency for Argentines. This creates an incentive to acquire MEP/CCL/Blue dollars as they offer a cheaper option for international purchases compared to the dollar tarjeta.

Moreover, they announced the return of the crawling peg, but at a devaluation rate of merely 2% per month—significantly below the inflation rate. In many respects, this situation seems to echo the past, portraying a scenario of "meet the new boss, same as the old boss."

It's even worse now because you're likely to witness inflation in USD.

 

[bairon]

I wish I had more insight. The shift in the exchange rate seems disconnected from the everyday price of items like lettuce at the local market. If someone abroad needs pesos to buy the lettuce, they'll pay more for pesos, but the local shop owner isn't concerned about conversion rates. For an Argentinean buying dollars, the premium over the official rate is determined by the government's dollar availability. There's no clear formula for the blue peso premium—it depends on factors beyond prediction. Is there a reason to trust the local currency more? Not currently. Any potential change depends on shifts in demand for dollars. So, the new official conversion rate doesn't seem to impact things unless there's a shift in the demand for dollars. The local lettuce price remains unchanged.

 

[Dario]

 

[bairon]

I wish I had more insight. The shift in the exchange rate seems disconnected from the everyday price of items like lettuce at the local market. If someone abroad needs pesos to buy the lettuce, they'll pay more for pesos, but the local shop owner isn't concerned about conversion rates. For an Argentinean buying dollars, the premium over the official rate is determined by the government's dollar availability. There's no clear formula for the blue peso premium—it depends on factors beyond prediction. Is there a reason to trust the local currency more? Not currently. Any potential change depends on shifts in demand for dollars. So, the new official conversion rate doesn't seem to impact things unless there's a shift in the demand for dollars. The local lettuce price remains unchanged.

Concerning this message, retailers may likely increase lettuce prices—reasons for which are not explicitly mentioned. Additionally, the Blue market is initially quoted at 1100/1150.

 

[RelaxGuy]

I wish I had more insight. The shift in the exchange rate seems disconnected from the everyday price of items like lettuce at the local market. If someone abroad needs pesos to buy the lettuce, they'll pay more for pesos, but the local shop owner isn't concerned about conversion rates. For an Argentinean buying dollars, the premium over the official rate is determined by the government's dollar availability. There's no clear formula for the blue peso premium—it depends on factors beyond prediction. Is there a reason to trust the local currency more? Not currently. Any potential change depends on shifts in demand for dollars. So, the new official conversion rate doesn't seem to impact things unless there's a shift in the demand for dollars. The local lettuce price remains unchanged.

• There isn't a specific formula to determine the premium of the blue peso. The Blue market, MEP, Dolar Cripto, CCL, etc., all converge around the same rate, reflecting the equilibrium where USD/ARS supply and demand meet.
• Is there any reason to have more confidence in the local currency?

No, as the dollar, despite its imperfections, has consistently proven to be a more reliable store of value compared to the peso or nearly any other currency.

• The new official conversion rate might not seem transformative.

However, it does bring about changes. For instance, imports essentially receive subsidies from the central bank when the official rate is lower. While lettuce might not be directly imported, various inputs for its production, such as fertilizers, machinery, and pesticides, could be. With subsidies removed for energy and gasoline, production costs for lettuce and other goods have increased. Consequently, consumers are likely to experience higher prices.

The previous government subsidized numerous sectors to control prices, contributing to the country's financial challenges. The current approach, influenced by Milei's economic philosophy, involves implementing shock therapy by eliminating these artificial price controls to restore the government's financial health. The success of these measures in economic terms is anticipated, but the potential for social discontent has led to additional steps, such as increasing welfare payments, to address concerns. The situation is dynamic, and the outcome remains uncertain.

 

[StatusNomadicus]

"dollar tarjeta" is around 1320.

DÓLAR TURISTA $1312
DÓLAR MEP $1034

https://www.infobae.com/?noredirect

i'll try some card spends tonight to see the difference. my 4 beers and pizza at Bonnie&Clyde's last night was exactly 14,000 Pesos (with huge tip added on the credit card machine, as some other people do, since i had no cash) which posted on my Citi Mastercard as $14.97 USD - so 935.20 ARS/USD conversion at 11pm on 12Dec2023 for reference. i'll test it tonight, @bar_00 and let ya know what my card shows 🙂

 

[Rico]

I wish I had more insight. The shift in the exchange rate seems disconnected from the everyday price of items like lettuce at the local market. If someone abroad needs pesos to buy the lettuce, they'll pay more for pesos, but the local shop owner isn't concerned about conversion rates. For an Argentinean buying dollars, the premium over the official rate is determined by the government's dollar availability. There's no clear formula for the blue peso premium—it depends on factors beyond prediction. Is there a reason to trust the local currency more? Not currently. Any potential change depends on shifts in demand for dollars. So, the new official conversion rate doesn't seem to impact things unless there's a shift in the demand for dollars. The local lettuce price remains unchanged.

It represents unexpected profits, similar to a scenario where OPEC increases the price of Gulf Crude Brent or Texas Crude, and a small-scale oil producer in Texas, extracting 25 barrels per day, also raises their prices in response. What alters for the small producer in this situation?

 

[Rico]

Concerning this message, retailers may likely increase lettuce prices—reasons for which are not explicitly mentioned. Additionally, the Blue market is initially quoted at 1100/1150.

Somewhat let down; I thought the difference with the Blue rate would be 100%, surpassing the official 800-peso mark!

 

[Redpoint]

It's even worse now because you're likely to witness inflation in USD.

Thank you, but I continue to gauge inflation using my wine index. For instance, where I usually find Nampe, it's still around $1.50 US. At that price, it's a great deal.

 

[StatusNomadicus]

"dollar tarjeta"

following-up for the info i said i'd post, my data from 13Dec2023 at 10-11pm was:

8200 Pesos for two very expensive beers and no tip (Temple Bar in La Plaza - holy hell, no wonder they didn't have prices on the menu! 4200 for a pint?? never going back there. even Puerto Madero was only 2900 for a Stout pint - Av. Corrientes 1660 Local 8, C1042 CABA, Argentina) was on my MasterCard was $8.54 USD, so 960.18 ARS/USD

2800 Pesos for two slices of pizza at Pizzeria Guerrin (i'll mention this elsewhere, but damn was that pizza horrible! USA gas station pizza and middle-school cafeteria white-bread cheap-tasting pizza is better than Guerrin...why there's a massive line, no one knows, since i got way better and cheaper pizza at Bonnie&Clyde bar!) was $2.91 USD, so 962.20 ARS/USD, pretty much exactly the same as the above place

we'll see what tonight the 14th is. i also won't post this stuff if no one is interested, and just keep it on my personal spreadsheet for Argentina research, just let me know what you want to see and i will try

 

[earlyretirement]

following-up for the info i said i'd post, my data from 13Dec2023 at 10-11pm was:

8200 Pesos for two very expensive beers and no tip (Temple Bar in La Plaza - holy hell, no wonder they didn't have prices on the menu! 4200 for a pint?? never going back there. even Puerto Madero was only 2900 for a Stout pint - Av. Corrientes 1660 Local 8, C1042 CABA, Argentina) was on my MasterCard was $8.54 USD, so 960.18 ARS/USD

2800 Pesos for two slices of pizza at Pizzeria Guerrin (i'll mention this elsewhere, but damn was that pizza horrible! USA gas station pizza and middle-school cafeteria white-bread cheap-tasting pizza is better than Guerrin...why there's a massive line, no one knows, since i got way better and cheaper pizza at Bonnie&Clyde bar!) was $2.91 USD, so 962.20 ARS/USD, pretty much exactly the same as the above place

we'll see what tonight the 14th is. i also won't post this stuff if no one is interested, and just keep it on my personal spreadsheet for Argentina research, just let me know what you want to see and i will try

Thank you for your boots on the ground reporting! I think this is very essential and helpful. Thanks for taking the time to do this! Your posts are great!

 

[walter50]

Can someone give me a straightforward answer? I've been residing in Buenos Aires, but I'm currently in Chile until January. Is it worth returning?

 

[timon]

I wish I had more insight. The shift in the exchange rate seems disconnected from the everyday price of items like lettuce at the local market. If someone abroad needs pesos to buy the lettuce, they'll pay more for pesos, but the local shop owner isn't concerned about conversion rates. For an Argentinean buying dollars, the premium over the official rate is determined by the government's dollar availability. There's no clear formula for the blue peso premium—it depends on factors beyond prediction. Is there a reason to trust the local currency more? Not currently. Any potential change depends on shifts in demand for dollars. So, the new official conversion rate doesn't seem to impact things unless there's a shift in the demand for dollars. The local lettuce price remains unchanged.

I'm not entirely clear on your question. Are you inquiring about the reasons behind price increases in Argentina following a devaluation? Or is there another aspect you're referring to?

 

[stm79]

Can someone give me a straightforward answer? I've been residing in Buenos Aires, but I'm currently in Chile until January. Is it worth returning?

This seems to be a personal decision. What was the reason for your initial visit to Buenos Aires?

 

[walter50]

I read that in Argentina, fuel prices surged by 37% following a devaluation. There is a significant rise in food prices, particularly for beef. Inflation is expected to climb between 20% and 40% monthly in the coming months, with some stabilization anticipated after several months. Over the long term, prices are projected to approach those in the European Union and the United States, though not to the same extent, but in closer proximity than they are

 

[bairon]

I read that in Argentina, fuel prices surged by 37% following a devaluation. There is a significant rise in food prices, particularly for beef. Inflation is expected to climb between 20% and 40% monthly in the coming months, with some stabilization anticipated after several months. Over the long term, prices are projected to approach those in the European Union and the United States, though not to the same extent, but in closer proximity than they are

...and the bovine will leap across the lunar surface.

 

[perroc]

...and the bovine will leap across the lunar surface.

In the near future, you may find yourself paying $20 for a kilogram of premium meat. The combination of currency devaluation and the removal of subsidies on essential services is expected to cause a twofold increase in prices, denominated in US dollars, for food and various goods within the next six months.

 

[Redpoint]

I observed that the Nampe Malbec 2023 has been replenished at my nearby Chinese market, priced at 1350 units of the local currency. Considering the current exchange rate, this translates to approximately $1.30 per bottle in US dollars.

 

[bairon]

In the near future, you may find yourself paying $20 for a kilogram of premium meat. The combination of currency devaluation and the removal of subsidies on essential services is expected to cause a twofold increase in prices, denominated in US dollars, for food and various goods within the next six months.

Only one question... what is the reason?

 

[perroc]

Only one question... what is the reason?

With a monthly inflation rate of 30% in the realm of mathematics, and considering that the blue rate isn't depreciating at the same rate (30% per month), within six months, the cost of meat could potentially increase by at least two times when denominated in US dollars.