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

[Rico]

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.

The cost of my medication has doubled in US dollars since November 10th...!

 

[Rico]

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.

The entire situation depends on the difference between the Blue (parallel) and Official exchange rates, which currently stands at 33%. I believe that sooner or later, this gap could widen to 100%, resulting in a Blue dollar exceeding $1200.

 

[greiger]

The entire situation depends on the difference between the Blue (parallel) and Official exchange rates, which currently stands at 33%. I believe that sooner or later, this gap could widen to 100%, resulting in a Blue dollar exceeding $1200.

The gap between the two rates only exists because the official rate is significantly divergent from the actual economic reality. As prices in pesos rise, the parallel rate remains stable, leading to a substantial increase in prices when converted to dollars.

 

[Painting]

The gap between the two rates only exists because the official rate is significantly divergent from the actual economic reality. As prices in pesos rise, the parallel rate remains stable, leading to a substantial increase in prices when converted to dollars.

Nevertheless, in August, a surge in the official exchange rate, rising from 300 to 367 Pesos per Dollar, caused the Blue Dollar rate to increase from 605 to 720. What has changed in the current scenario?

 

[greiger]

Nevertheless, in August, a surge in the official exchange rate, rising from 300 to 367 Pesos per Dollar, caused the Blue Dollar rate to increase from 605 to 720. What has changed in the current scenario?

the larger the gap, the more money there is to be made by arbitraging the gap. make the gap small enough and it no longer becomes economically viable to arbitrage, or at the very least results in a much smaller number of players attempting to arbitrage the gap

in simple terms, the closer the dolar oficial is to blue the less motivation there is for people in cuevas to make money buying and selling the gap between the two. the smaller the brecha, the less silly crazy stuff you see happening because of a distorted market.

 

[TTzac]

In a potential future scenario, Argentina experiences a significant boost in exports over the next year, driven by reduced restrictions, a favorable exchange rate, and improved weather conditions, including increased rainfall. Concurrently, the United States initiates a series of interest rate cuts. If Argentina manages to maintain a balanced budget, these factors could collectively lead to a substantial shift in exchange rates, potentially differing from the expectations of some individuals. It's important to note that the realization of these developments remains uncertain, but based on Milei's plans, there appears to be promise in this regard.

 

[Painting]

the larger the gap, the more money there is to be made by arbitraging the gap. make the gap small enough and it no longer becomes economically viable to arbitrage, or at the very least results in a much smaller number of players attempting to arbitrage the gap

in simple terms, the closer the dolar oficial is to blue the less motivation there is for people in cuevas to make money buying and selling the gap between the two. the smaller the brecha, the less silly crazy stuff you see happening because of a distorted market.

Isn't a 20% margin sufficient for arbitrage?

 

[bairon]

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.

I've noticed a significant change. The precooked ribs package, which was priced at 4100 last week, has now jumped to 5500. As for the KANSAS menu, although I don't have the exact old prices, it seems the ribs, which were previously around 11000 to 12000, are now at 16000, and other items on the menu are now at 20,000. These are substantial increases, and it's disheartening to witness such significant price hikes.

 

[Josh]

Yesterday, my preferred chocolate bar was priced just over $2,000 pesos, but today, the cashier charged $4,500 pesos for it. Once I identify who is accountable for this, there will be serious consequences. 🤨

 

[on the rock]

If we refrain from purchasing non-essential items, there is a possibility that prices will decrease over time. Eventually, we may see a reduction in prices.

 

[greiger]

Isn't a 20% margin sufficient for arbitrage?

As a soy farmer, the significant gap of 350 pesos at the official rate to 1000 pesos at the blue rate, coupled with the tax savings, makes the idea of smuggling my crop to Paraguay quite attractive. However, considering the 20% margin, the question arises whether it's worth the risk. Does this margin cover transportation costs and potential bribes? This is just one illustration of how not everyone is engaging in high-risk arbitrage, and certain forms of such activities might not be financially viable with a narrower gap.

 

[greiger]

If we refrain from purchasing non-essential items, there is a possibility that prices will decrease over time. Eventually, we may see a reduction in prices.

The dynamics have changed. Previously, their production costs were subsidized, but with the removal of those subsidies, it becomes challenging for them to replace the product they sold at a lower cost. Unless businesses are facing closure, they are unlikely to sell their existing stock for less than what it would cost to replenish.

 

[RN in BA]

If we refrain from purchasing non-essential items, there is a possibility that prices will decrease over time. Eventually, we may see a reduction in prices.

I don't think that's how it works. They used to receive subsidies, but now that the subsidies have stopped, they won't be able to procure the necessary products to replace the product they previously sold at a lower cost. Unless a business is on the brink of closure, they won't part with their inventory for a price lower than what it would take to restock.

 

[Calgary Foodie]

I'm a bit confused still. I saw the dollar tarjeta the other day jumped to 1,320 so I thought that would be good for tourists.

I initially perceived the situation as an increased incentive to use my card due to the stronger exchange rate for the tarjeta dollar against pesos. However, upon reviewing my transactions, it appears that the rate remains at 945.

Do you anticipate credit card companies (such as Visa in this instance) adjusting to the updated rates and refunding the discrepancy in recent transactions, or will they adhere to the previous fixed rates?

 

[Canada Goose]

I'm a bit confused still. I saw the dollar tarjeta the other day jumped to 1,320 so I thought that would be good for tourists.

I initially perceived the situation as an increased incentive to use my card due to the stronger exchange rate for the tarjeta dollar against pesos. However, upon reviewing my transactions, it appears that the rate remains at 945.

Do you anticipate credit card companies (such as Visa in this instance) adjusting to the updated rates and refunding the discrepancy in recent transactions, or will they adhere to the previous fixed rates?

You're totally confused. I was too my first few weeks. There are so many exchange rates.

Go here:https://www.dolarito.ar/

Then click on the little grey circle with the question mark and it will explain it. Dolar tarjeta says:

El precio del dólar tarjeta corresponde al del dólar oficial más un aumento del 60%. Ese aumento corresponde al impuesto PAIS (30%), una concepto de adelanto de ganancias para turismo y gastos de tarjeta de crédito y débito en el exterior (30%).

El dólar tarjeta es el que usan los argentinos para viajar al extranjero. De allí proviene su nombre, aunque también se aplica a las compras que se hacen en Argentina en dólares.

Google Translate:

Which translates to: The price of the card dollar corresponds to that of the official dollar plus an increase of 60%. This increase corresponds to the PAIS tax (30%), a concept of advance earnings for tourism and credit and debit card expenses abroad (30%).

So this is the exchange rate that credit card companies charge local Argentines when they are paying for stuff when they are outside of Argentina. The higher it is, the worse it is for the local. They probably do this to discourage travel abroad and to stay in Argentina.

 

[Larry]

I recall the glory days when for about $9.50 you could go to the restaurant Kansas and eat to your heart's content. Looking at the menu now it's more like $32 US dollars on average with a cocktail.

 

[Huge Hurry]

I recall the glory days when for about $9.50 you could go to the restaurant Kansas and eat to your heart's content. Looking at the menu now it's more like $32 US dollars on average with a cocktail.

I don't recall when you could go to Kansas for so cheap. What year was that? You seem to make it sound like BA is so expensive now when it's not that expensive. You keep saying most restaurants in BA are at US prices. That isn't true.

Sure, there are probably some restaurants that are near US prices but when is the last time you were in the USA? I think you would be in for a rude awakening. I just had steak last month with my daughter and it was sickening to pay what they are charging. The vast majority of places in BA are very cheap compared to their US counterparts.

Same with Uber. I took an Uber in many cities while on vacation and it was crazy what some of the charges were.

The USD should go up to significant heights during this mess. My guess is maybe 1,800 per $1 USD

 

[Larry]

I don't recall when you could go to Kansas for so cheap. What year was that? You seem to make it sound like BA is so expensive now when it's not that expensive. You keep saying most restaurants in BA are at US prices. That isn't true.

Sure, there are probably some restaurants that are near US prices but when is the last time you were in the USA? I think you would be in for a rude awakening. I just had steak last month with my daughter and it was sickening to pay what they are charging. The vast majority of places in BA are very cheap compared to their US counterparts.

Same with Uber. I took an Uber in many cities while on vacation and it was crazy what some of the charges were.

The USD should go up to significant heights during this mess. My guess is maybe 1,800 per $1 USD

The Argentine peso has to jump to about 3,100 pesos to the $US dollar by mid-2024 if it is going to beat the inflation. I don't think it gets to your guess of 1,800 to $1 US. But let's say it goes up to 2,000 to $1. That signifies a price jump of over 50% in US dollar terms by that time.

 

[Canada Goose]

I recall the glory days when for about $9.50 you could go to the restaurant Kansas and eat to your heart's content. Looking at the menu now it's more like $32 US dollars on average with a cocktail.

You seem to be a "glory days" type of guy. Always talking about the glory days and complaining about every thing now. Hell, I've never read about an expat that didn't find happy things with the prices now. Sure, things are going up but things are pretty darn cheap now in many things compared to world capital cities.

Are you sure inflation is going to be 200%+ over the next 6 months? That's much more than anyone is predicting. Didn't you also guarantee a Massa victory. LOL.

And if things are this bad what do you think it would have been under Massa?

 

[Tommy]

The Argentine peso has to jump to about 3,100 pesos to the $US dollar by mid-2024 if it is going to beat the inflation. I don't think it gets to your guess of 1,800 to $1 US. But let's say it goes up to 2,000 to $1. That signifies a price jump of over 50% in US dollar terms by that time.

So, here's the deal – the whole Uruguayization example as a country thingy. Salaries are low, prices are through the roof, and the dollar is just not keeping up.

The economic Minister, Caputo spilled the beans, saying they're going for a 2% monthly crawl in the exchange rate. That means, by June 2024, officially, we'll be looking at around 919.09 pesos per dollar. But let's be real, inflation's gonna be off the charts. According to Caputo, it's running at 1% per day right now!

Back in the day when President Macri was in charge, it was actually cheaper to chill in Brazil when we hit up Iguazu Falls. But guess what? We're back to that, only this time with a whopping 200% inflation. My meds, for instance, were 55K in November, and now they're a whopping 92K.

I'm betting non-essential stuff is gonna take a nosedive, and companies will have to wake up from this crazy dream at some point. Aerolineas just jacked up their ticket prices big time for domestic flights today. The plane's gonna fly, whether it's packed or empty, but filling those seats is a must. Making money on 100K per leg won't cover the cost of all those empties. It's a mess out here!