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Banking What is going on with the Blue dollar? Why is it going down?
- Thread starter James Bond
- Start date
earlyretirement
Moderator
Yes most cuevas have drastically increased their rates due to so many locals bringing their USD back into Argentina for the money laundering amnesty. Many people need dollars here to deposit so a flood of people are taking savings they have abroad and all racing to send it to Argentina so they can take advantage of the amnesty. I've seen this before. When this happen, the cost to get cash in Argentina goes up.
On the positive side, if you have cash in USD and trying to send outside of Argentina the cuevas are paying you a commission to take the cash off your hands. I just had a client sell a property and the buyer insisted on paying in cash and he got paid 1.5% to get his cash wired to his USA bank account. Nothing better than free money. He just made $4,000 as the cueva needed that cash.
The cueva commission is always based on supply and demand.
Blockchain
Well-known member
I don't understand this mentality. Is there any anger for expats that moved to Argentina because it was an affordable option? I read a few posts where locals seem to be angry at foreigners or tourists that come to Argentina because it was affordable. Why or how is this a problem? It would make sense that people come or move to a country that is affordable.
What does it mean to not have no sympathy for those that came here to take advantage of the blue dollar rate. Isn't that a good thing for people to come to your country when the country is suffering? They are spending money so why does it matter?
It seems like there are many experts saying the peso is too strong and it's artificially strong.
Saw this article and it talks about how unsustainable it is that the peso is too strong.
Dura advertencia de un gurú de Wall Street sobre el futuro del dólar en la Argentina: “La devaluación es inevitable e ineludible”
El economista jefe del IIF, entidad que agrupa a las principales entidades financieras globales, Robin Brooks, anticipó que la apreciación que muestra el peso argentino en lo que va de la gestión de Javier Milei se volverá insostenible
www.infobae.com
This one talks about how tourism could suffer if the peso gets too strong.
El blanqueo de dólares superó todas las expectativas e impulsa al Gobierno a dar nuevos pasos
El frente cambiario tuvo varias señales favorables, incluida la reducción de la brecha, que renovó especulaciones sobre la salida del cepo. Hacia adelante, preocupa la salida de dólares en las vacaciones de verano. El Ejecutivo pedirá un freno a la Justicia si el Congreso reimpone el...
www-infobae-com.translate.goog
I will never understand locals that feel like foreigners coming to Argentina when the dollar is strong are some how taking advantage of the situation. Wrong attitude. I have seem that before where people think there is something wrong with moving to Argentina to take advantage of the advantageous exchange rate. I agree there are downsides to the Argentine peso getting too strong. Tourism will definitely suffer. Both incoming foreigners and also locals won't want to stay in Argentina and will just come to Brazil for vacation.I don't understand this mentality. Is there any anger for expats that moved to Argentina because it was an affordable option? I read a few posts where locals seem to be angry at foreigners or tourists that come to Argentina because it was affordable. Why or how is this a problem? It would make sense that people come or move to a country that is affordable.
What does it mean to not have no sympathy for those that came here to take advantage of the blue dollar rate. Isn't that a good thing for people to come to your country when the country is suffering? They are spending money so why does it matter?
It seems like there are many experts saying the peso is too strong and it's artificially strong.
Saw this article and it talks about how unsustainable it is that the peso is too strong.
Dura advertencia de un gurú de Wall Street sobre el futuro del dólar en la Argentina: “La devaluación es inevitable e ineludible”
El economista jefe del IIF, entidad que agrupa a las principales entidades financieras globales, Robin Brooks, anticipó que la apreciación que muestra el peso argentino en lo que va de la gestión de Javier Milei se volverá insostenible
This one talks about how tourism could suffer if the peso gets too strong.
El blanqueo de dólares superó todas las expectativas e impulsa al Gobierno a dar nuevos pasos
El frente cambiario tuvo varias señales favorables, incluida la reducción de la brecha, que renovó especulaciones sobre la salida del cepo. Hacia adelante, preocupa la salida de dólares en las vacaciones de verano. El Ejecutivo pedirá un freno a la Justicia si el Congreso reimpone el...
The only way we will know what a fair value for the peso is when the government stops propping up the peso. With any currency true value is what the market dictates without interference. The intervention is complex. Argentina hasn't stopped using money. There are many short-term public debt instruments that are paying interest and working the same as printing of money.
It is a bit of smoke and mirrors right now. Anyone that thinks that the exchange rate right now is a fair representation of what the dollar and peso should be don't understand what is going on. The government is covering up true deficits as a specific monetary policy. They are doing this to try to lower inflation. This isn't anything new that Milei thought of. If you look back to 1979 this is the same model that José Alfredo Martínez de Hoz tried.
It might work for a little while but this will just result in accumulating more debt and end up destroying the country. Manipulating the exchange rate so the peso is stronger to slow down inflation might make some people make $$$$ but eventually, it will probably collapse and be forced to devaluate their currency. This is what Robin Brookes is saying in that article.
With this meddling of the exchange rate with everything the government is doing is just creating conditions for USD carry trade arbitrage. These investors are selling dollars, buying LECAP's that yield 4% monthly and they know because the government is manipulating peso the USD exchange rate will remain stable. With a controlled 2% monthly devaluation which yields 27% APR in dollars. As long as the big money investors are making their profits the exchange rate will remain stable but when these investors are done making their $$$$ things will eventually shift.
Finance Prof
Well-known member
Excellent analysis. Complicated isn't the half of it! This sums up what my friends in BA entrenched in banking and finance tell me. Anyone that pretends to know what is going to happen is a liar. You can't predict with so many variables and with all of the intervention. You nailed it @oil rush! There are a lot of people making a lot of money.
Once the peso is floating freely without the government doing anything will give us what the exchange rate should be. People try to act like so many things are solved and that is not the case in Argentina. We are still in a recession and net reserves are still negative by $5 billion USD and just like that article says it will probably be a $10 USD billion deficit by January 2025.
It is going to be a wait and see game until next year.
Betsy Ross
Well-known member
I don't know anyone that disagrees with this. Right now no one knows. @oil rush @earlyretirement @Finance Prof do any of you have any estimates when the CEPO might end?
Digital Nomad
Well-known member
I think with the economy so terrible there are some locals that are frustrated and take it out on tourists. Doesn't make any sense to me but I have come across that type here. I will make some comment how things have gotten expensive here and I will get wild answers like how Argentina is one of the best countries and should have prices to match. I just laugh because salaries here are a fraction of other countries.
Some here think expats arbitrating are locusts but I disagree.
Interesting about what that guy that used to work at Goldman is saying. Almost everyone here says the same thing the peso is too strong. I guess we will know once all intervention is over with. Not sure when that will happen.
Very very good explanation. The typical local does not understand any of this. How can people think all of a sudden things are solved. I have seen this story before and it does not end well.
No one knows for sure but I can't see this happening before the middle of 2025 at the earliest. Maybe not until the end of 2025. Milei is finding out it is more difficult to actually run the country vs. just in theory. That is why Caputo is here. The dollar could get weaker yet but once they get rid of currency controls I would estimate a weaker peso. No way to know the true value until the government stops manipulating true value and it floats free without any intervention.
import export
Well-known member
Agree that the typical person in Argentina knows nothing about economics. Some of the very poor that voted for Milei had no idea that they would suffer the most even though he told them what was coming. These people were just so desperate for change. They liked the idea of the chainsaw and stopping spending by the government but they didn't know that the government would raise prices so brutally. You can count on the party losing these votes in the mid-term 2025 elections.
Even educated don't know all of how the intervention works. I don't know of any successful forex intervention cases that have turned out well over the long haul. Japan, England, and recently Switzerland. The imbalance will eventually be corrected by the markets. The minute the intervention is over, and things shift. That is why they can't end CEPO now or probably any time soon.
badluck
New member
The reality is that many Argentines feel that, in times of crisis, foreigners come in and disproportionately benefit. With a strong currency like the dollar (not so much at this moment), they can easily access luxury goods, whether it’s high-end technology, meals at expensive restaurants, domestic travel, or even properties. Meanwhile, for locals, these goods and experiences become impossible and almost prohibitive.
I understand that the frustration of Argentines stems from the fact that, facing inflation, devaluation, and stagnant wages, they can’t afford the same luxuries that foreigners seem to enjoy effortlessly. This creates a sense of inequality, as locals struggle to meet basic needs while tourists or foreign residents take advantage of relatively low prices to access premium products and services.
However, they should understand that the main issue isn’t the presence of foreigners with greater purchasing power, but the internal economic distortions that make it difficult for Argentines to compete in their own market. Government intervention in the economy, rampant inflation, and the devaluation of the peso have created a context where prices, especially in dollars, do not reflect the true situation of most citizens.
Instead of directly blaming foreigners, the solution should focus on stabilizing the local economy, improving real wages, and controlling inflation. If the economy were managed more equitably and allowed Argentines to have purchasing power that reflects the real value of their work, there would be less resentment toward foreigners who are simply taking advantage of the opportunities presented by the favorable exchange rate. Nevertheless, this is something relatively new; I’ve never heard or felt this sensitivity toward foreigners, whether tourists or residents, until now.
In summary, I believe that we foreigners are not necessarily to blame for the situation, but I understand that for locals, our presence exacerbates the inequalities caused by the economic crisis and internal policies. As long as these structural issues remain unaddressed, the perception that foreigners are "taking advantage" will persist.
briceBA
New member
I totally get what you’re saying! Lately, I’ve been hearing a lot of this kind of sentiment, and it’s interesting because it wasn’t like this before. I think locals are feeling a bit more sensitive and maybe even frustrated with the situation. It’s tough to watch foreigners come in and enjoy things that seem out of reach for many, especially with the economic struggles.
But I also believe it’s important to recognize that tourism plays a crucial role in the country’s economy. It brings in revenue and creates jobs, which can benefit everyone in the long run. If locals can embrace the idea that tourism is vital, it might help ease some of that discontent. We’re all navigating this complicated situation together, and understanding each other's perspectives could lead to a more positive atmosphere for everyone involved.
earlyretirement
Moderator
If anyone tries to tell you that they can predict what will happen or when the CEPO might end they are lying. I honestly don't see the CEPO ending until maybe end of 2025. I hope I am wrong and it is sooner but from everything the government has hinted at, it's not going to be anytime soon.
There are some excellent points being made about all the intervention of the currency market. But in the end the government will do what they think is working. The intervention is obviously working for now so the government doesn't have any incentive to probably end that any time soon. The caveat being that it will probably mean the IMF won't lend more money.
Ultimately and ironically I think that it will be China that will play a larger role in Argentina.
Fortunately most people realize how important tourism is. Most people here know it drives a big part of the economy. Stores, restaurants, cafes, bars all do well with tourism. Also its not like foreigners drive up prices. People here are already used to crazy inflation and they know it isn't caused by tourists.
The ones that I come across that have a negative attitude seems to come out of frustration. They see expats that moved here with a strong blue dollar and then complain about cost of living when they have dollars meanwhile they are trying to get buy with pesos. That is usually when they get angry.
This is how it was explained to me by a friend in BA who works at a bank there. He said this exchange rate is all artificial and once they remove the currency controls, you will see how things turn out then. He said that it's not reasonable that the peso is valued so high in an economy that is simply not competitive at all.
He said the dollar is very cheap now because of the monetary policy in place. It's a carbon copy of the platform that Martinez de Hoz tried with his crawling peg of the dollar at 2% and rate at 4%. Each month that goes by the State owes more. This has played out before and did not turn out well.
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I don't know much about how all of this works. What I don't understand is the government has net negative reserves. That is a fact. What is going to happen next year when all the debt comes due and they have wasted cash by lowering the CCL. Where will the money come from? They will have to take on even more debt to pay off the old debt. I have read that maturities due next year are $15 billion. Where does this come from?
I saw they set aside interest payments only for their January 2025 payment but that's only for the interest.
I saw they set aside interest payments only for their January 2025 payment but that's only for the interest.
Avocado
Well-known member
This was one of the best posts on this entire site @oil rush. Milei said he was going to get rid of the caste. He called Caputo the worst Economic Minister in the history of Argentina. So who does he pick for his? Caputo. Is a joke!
Listen to this economist that Milei said is someone he studied. Listen to what he says about Milei. This is a man that Milei said he studied. And the economist talks about how bad Milei is doing.
I watched that. He blasts Milei for having the same people that got Argentina into this mess in the first place including Caputo. Still no trust in the Central Bank and probably never will be.
He says Milei is NOT a true Libertarian. Blasts him for not staying neutral in conflicts and other countries. He says he doubts Milei has studied much. Some of what he says is not realistic like walking away from all debt obligations but definitely worth listening to.
I did like his points for criticizing his love for Israel and the Ukraine.
James Bond
Well-known member
I watched this the other day. I didn't know who it was but found some of what he said interesting. Most people I know supported Milei and some still do but it is getting painful for them. The main arguments that they have are for not shutting down the Central Bank when that was the biggest thing he was saying going around with his chainsaw. And getting Argentina involved with the Ukraine and Israel. I don't know who Milei thinks wants that. No one I know supports that.
Most of the friends that now regret things are having a tougher time now getting by. Many just feel like Milei is out of touch with typical person now.
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