Economy What Would Dollarization Mean for Expats?

[earlyretirement]

How did the Ks get to be oligarchs? Wasn't CFK's father a bus driver?

They stole tens of millions of dollars. They also enriched themselves through various other schemes. I know close friends that grew up in the same town with them and they confirmed they never had this kind of money before or even their first years in office. Although it SURE came rolling in rather quickly after they came into office.

As far as Milei, my feeling is Argentina needs a big change. They have to try something different. Let's face it, the last several Presidents have been horrible. And I don't think women care too much about the abortion issue as it pertains to Milei. Why? Because these women would rather their family not staves right now. Many women there don't even ever married. And with the inflation, VERY few people are thinking about having kids. Being scared, tired, desperate and hungry are more urgent priorities vs. worrying about other things.

In theory, if they could get enough US dollars here and there was some concrete plan in place where they got all the Argentines that are holding hundreds of billions of dollars to safely and without fear bring their funds in at least dollarizing would help cut down on inflation. But there are a lot of other things that have to get fixed. Laws to be changed. And I don't see that happening quickly or easily.

One thing even if Milei doesn't win is the other side sees that they have to go towards the middle. Being too far right and too far left isn't the winning formula these days.

 

[SerchMinm]

They stole tens of millions of dollars. They also enriched themselves through various other schemes. I know close friends that grew up in the same town with them and they confirmed they never had this kind of money before or even their first years in office. Although it SURE came rolling in rather quickly after they came into office.

As far as Milei, my feeling is Argentina needs a big change. They have to try something different. Let's face it, the last several Presidents have been horrible. And I don't think women care too much about the abortion issue as it pertains to Milei. Why? Because these women would rather their family not staves right now. Many women there don't even ever married. And with the inflation, VERY few people are thinking about having kids. Being scared, tired, desperate and hungry are more urgent priorities vs. worrying about other things.

In theory, if they could get enough US dollars here and there was some concrete plan in place where they got all the Argentines that are holding hundreds of billions of dollars to safely and without fear bring their funds in at least dollarizing would help cut down on inflation. But there are a lot of other things that have to get fixed. Laws to be changed. And I don't see that happening quickly or easily.

One thing even if Milei doesn't win is the other side sees that they have to go towards the middle. Being too far right and too far left isn't the winning formula these days.

I agree. As for abortion, reversing the decision is highly unlikely. I believe you are also right that whoever becomes President is going to have to find a middle course. If it is Milei he too will have to modify his views - and most likely he would do so. Change will take time but the process must begin. I don't see why dollarisation is such a radical idea, especially in a country that already considers the dollar its safe currency. It's not as though people have never seen or used dollars!

 

[earlyretirement]

I thought this was a great article. Most journalists don't really understand Argentina. Many have never even stepped foot in the country yet write about it.

Milei Is Not Argentina's Problem, Socialism Is... | ZeroHedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero

www.zerohedge.com

 

[QuiloBa]

I thought this was a great article. Most journalists don't really understand Argentina. Many have never even stepped foot in the country yet write about it.

Milei Is Not Argentina's Problem, Socialism Is... | ZeroHedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero

www.zerohedge.com

LOL I needed a laugh like this after a long day of work

 

[earlyretirement]

I liked this article - https://internationalman.com/articles/doug-casey-on-the-worlds-first-anarcho-capitalist-president

 

[RealLit]

I liked this article - https://internationalman.com/articles/doug-casey-on-the-worlds-first-anarcho-capitalist-president

"If Milei is elected, he’ll radically reduce taxes, which means that costs of production will drop radically. As the country dollarizes, the currency will stabilize, and gold could come next. Real prices could drop further, but not because of a collapsing currency. The economy should boom economically as investment pours in. People will go back to work, start saving, and rebuild domestic capital. Argentina could quickly become, again, one of the world’s richest countries."

Yes. Of course. The streets will be paved with gold, and the women will go naked on the beaches.

 

[earlyretirement]

"If Milei is elected, he’ll radically reduce taxes, which means that costs of production will drop radically. As the country dollarizes, the currency will stabilize, and gold could come next. Real prices could drop further, but not because of a collapsing currency. The economy should boom economically as investment pours in. People will go back to work, start saving, and rebuild domestic capital. Argentina could quickly become, again, one of the world’s richest countries."

Yes. Of course. The streets will be paved with gold, and the women will go naked on the beaches.

I don't think anyone is saying things will be easy. I've always told it like it is on this forum and others. Argentina is in for a world of hurt no matter who is President. Like I posted before, my first trip to Argentina there were 5 presidents in 2 weeks. Let's see what happens.

But Argentina needs a change. That much I don't know how ANYONE can argue with.

 

[SerchMinm]

"There is no real local or global demand for pesos, as investors and citizens know that the government will continue to print currency without control."

"Argentina is already dollarized in large part because citizens are fleeing the local currency."

Argentines are accustomed to using dollars. Dollarisation is therefore far from a radical idea.
The media routinely brand Milei as 'far right' but seldom ever refer to Fernandez/CFK etc as "far left"
How can any rational person not see that the current system has utterly failed?
Instead of debating ISSUES many seem more focused on Milei's personal life and eccentricities - some of which may be true, some of which may be made up or exaggerated.
One way or the other, change is coming.

 

[FrankPintos]

"There is no real local or global demand for pesos, as investors and citizens know that the government will continue to print currency without control."

"Argentina is already dollarized in large part because citizens are fleeing the local currency."

Argentines are accustomed to using dollars. Dollarisation is therefore far from a radical idea.
The media routinely brand Milei as 'far right' but seldom ever refer to Fernandez/CFK etc as "far left"
How can any rational person not see that the current system has utterly failed?
Instead of debating ISSUES many seem more focused on Milei's personal life and eccentricities - some of which may be true, some of which may be made up or exaggerated.
One way or the other, change is coming.

Maybe you could explain what you mean by "far left"? I'd understand it to mean state ownership of production, collectivization, restrictions on individual liberty, restrictions on the expression of political views...

Compared with that vision, "Fernandez/CFK" would seem to be much closer to a fairly typical European centre-left view, with a major role for the state in investment, research, education, health, as well as a social component with subsidized housing, unemployment / pension support, and so on. It's questionable how much of that Argentina can afford. but that doesn't make it far left.

 

[QuiloBa]

Maybe you could explain what you mean by "far left"? I'd understand it to mean state ownership of production, collectivization, restrictions on individual liberty, restrictions on the expression of political views...

Compared with that vision, "Fernandez/CFK" would seem to be much closer to a fairly typical European centre-left view, with a major role for the state in investment, research, education, health, as well as a social component with subsidized housing, unemployment / pension support, and so on. It's questionable how much of that Argentina can afford. but that doesn't make it far left.

Let's review:

• Argentina has never had a leftist, communist, or socialist president
• There are currently 4 people in congress who subscribe to this philosophy, and they're all Trotskyites from the FIT-U coalition
• Here is an article in which even Cristina identifies as an anti-communist, literally setting out a 20th Century Corporatist vision of Macroeconomics: "Cristina Kirchner to businessmen at Campora Meeting: "We need a virtuous alliance between capital and labor... Capitalism is the most efficient model . Watch ' Goodbye Lenin ' to end the discussion". You would be crucified if you said such a thing to socialists, and people who argue such beliefs are routinely mocked amongst lefts, including in groups I belong to, and she's the mother of the current flavor of Peronism
• If Peronists were socialists, they would have come in second with 7,089,582 votes, beating JxC during the PASO, but instead 628,893 votes went to FIT-U
• As Frank points out, there is no worker control of the means of production beyond basic co-ops you find in the most right wing countries
• Private property is hoarded and this is literally being complained about (by the same expats) in another thread due to the ridiculous rents being sought as a hedge against inflation
• American, Canadian, and Chinese firms control many mineral mining projects, and foreigners, rich locals, etc. can own as much productive agricultural land as they want (almost every leftist government starts with land reform)
• The security state is incredibly weak here: was the Soviet Union, DDR, Cuba, Vietnam, etc. known for uncontrolled petty crime in the neighborhoods inhabited by working class people? Hell no, now look at Zona Sur and Rosario and tell me that sh*t would be tolerated in Cuba
• YPF is a publicly traded company literally listed on the NYSE, the home of American capitalism and economic imperialism, Saudi Aramco is owned 90% by the KSA vs. 51% for YPF

I could go on, but it's a fruitless endeavor when you have communists running against Massa for president saying "vote for me, I hate Massa because I'm a communist" and people are still like "Wow, look at that commie Massa!" because Milei thinks public education is Marxism.

 

[SkySam]

Let's review:

• Argentina has never had a leftist, communist, or socialist president
• There are currently 4 people in congress who subscribe to this philosophy, and they're all Trotskyites from the FIT-U coalition
• Here is an article in which even Cristina identifies as an anti-communist, literally setting out a 20th Century Corporatist vision of Macroeconomics: "Cristina Kirchner to businessmen at Campora Meeting: "We need a virtuous alliance between capital and labor... Capitalism is the most efficient model . Watch ' Goodbye Lenin ' to end the discussion". You would be crucified if you said such a thing to socialists, and people who argue such beliefs are routinely mocked amongst lefts, including in groups I belong to, and she's the mother of the current flavor of Peronism
• If Peronists were socialists, they would have come in second with 7,089,582 votes, beating JxC during the PASO, but instead 628,893 votes went to FIT-U
• As Frank points out, there is no worker control of the means of production beyond basic co-ops you find in the most right wing countries
• Private property is hoarded and this is literally being complained about (by the same expats) in another thread due to the ridiculous rents being sought as a hedge against inflation
• American, Canadian, and Chinese firms control many mineral mining projects, and foreigners, rich locals, etc. can own as much productive agricultural land as they want (almost every leftist government starts with land reform)
• The security state is incredibly weak here: was the Soviet Union, DDR, Cuba, Vietnam, etc. known for uncontrolled petty crime in the neighborhoods inhabited by working class people? Hell no, now look at Zona Sur and Rosario and tell me that sh*t would be tolerated in Cuba
• YPF is a publicly traded company literally listed on the NYSE, the home of American capitalism and economic imperialism, Saudi Aramco is owned 90% by the KSA vs. 51% for YPF

I could go on, but it's a fruitless endeavor when you have communists running against Massa for president saying "vote for me, I hate Massa because I'm a communist" and people are still like "Wow, look at that commie Massa!" because Milei thinks public education is Marxism.

Unfortunate commentary in a post from someone whose posts I always enjoy reading. Although I understand your take on the article.

The reason that I think the article is excellent is that if you separate all the references to far-left, far-right, socialism, and other similar more-than-dubious qualifiers, and only look at the facts in the article, the things that have actually occurred, with plenty of hard numbers to back them up and irrespective of political ideology, it is a very good summary of what has been going on in Argentina during the twenty years that I've been here.

I'm not "right wing," I'm not stupid, and I didn't really appreciate the insult. I haven't always agreed with everything you've written, but I didn't insult you. But think what you will.

 

[QuiloBa]

Unfortunate commentary in a post from someone whose posts I always enjoy reading. Although I understand your take on the article.

The reason that I think the article is excellent is that if you separate all the references to far-left, far-right, socialism, and other similar more-than-dubious qualifiers, and only look at the facts in the article, the things that have actually occurred, with plenty of hard numbers to back them up and irrespective of political ideology, it is a very good summary of what has been going on in Argentina during the twenty years that I've been here.

I'm not "right wing," I'm not stupid, and I didn't really appreciate the insult. I haven't always agreed with everything you've written, but I didn't insult you. But think what you will.

But it's akin to saying Argentina has inflation problem (accurate), a excessive monetary issuance policy (accurate), but then framing these things as the result of Argentine President Bill Clinton's policy (not the President) which is destroying the East Asian country of Argentina (not where Argentina is located), two things that are factually wrong, even if the other two are true.

I struggle to trust someone's opinion or broader framing of an issue if they actively chose to misrepresent the facts, especially when it's not something that's remotely subjective (like what's the best flavor of ice cream, or debatable such as an ideal employment rate), but a core component of the entire thesis. If you argue Argentina's problem is socialism, and Argentina has never been governed by socialists or anything resembling Marxist political economy, it's hard for me to take people seriously, especially when they should know better.

 

[RinderHerts]

Menem privatized a huge swath of government owned industries over 30 years ago. IF, and its a big IF, the policies of the military dictatorship, with its over 40 military owned companies, as well as the government owned utilities, mineral, and petroleum industries were actually "left wing", then that changed by the early 90s. (I think a lot of the government owned companies were not socialist in any way, but corrupt, benefiting established figures of authority)
Protectionism, which is the main objection by many critics of current Argentine trade policy, is not inherently either left or right wing. Its usually done to protect local ownership of profitable companies- the vast majority of those privatized in Argentina and protected by the high tariffs, taxes, duties, and frictional costs, are actually owned by a handful of right of center families, who have actually given us their share of politicians who keep those policies in place.

 

[Setse]

But it's akin to saying Argentina has inflation problem (accurate), a excessive monetary issuance policy (accurate), but then framing these things as the result of Argentine President Bill Clinton's policy (not the President) which is destroying the East Asian country of Argentina (not where Argentina is located), two things that are factually wrong, even if the other two are true.

I struggle to trust someone's opinion or broader framing of an issue if they actively chose to misrepresent the facts, especially when it's not something that's remotely subjective (like what's the best flavor of ice cream, or debatable such as an ideal employment rate), but a core component of the entire thesis. If you argue Argentina's problem is socialism, and Argentina has never been governed by socialists or anything resembling Marxist political economy, it's hard for me to take people seriously, especially when they should know better.

it might not have been 100% aligned with the dictionary definition of socialism, but it's definitely under the umbrella. i ndon't see how you could argue otherwise.

socialism takes many forms. if the hard K's and Grabois had his way with this universal basic income, that right there is a big red flag.

 

[QuiloBa]

it might not have been 100% aligned with the dictionary definition of socialism, but it's definitely under the umbrella. i ndon't see how you could argue otherwise.

socialism takes many forms. if the hard K's and Grabois had his way with this universal basic income, that right there is a big red flag.

What specific aspects of the Ks are socialism? UBI is something literally proposed by libertarians too, so that doesn't make it inherently belong to any political affiliation, let alone socialism.

 

[earlyretirement]

What specific aspects of the Ks are socialism? UBI is something literally proposed by libertarians too, so that doesn't make it inherently belong to any political affiliation, let alone socialism.

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 sh*t about their country. For good reason.

 

[FrankPintos]

How much of the economy operates, and is affected by using the official Dollar exchange rate? Given that we have the free-market Blue Dollar rate, and (I read) up to 17 managed rates like the CCL, MEP, Qatar, Soya, Wine Dollars and so on, which are in varying degrees closer to the Blue Dollar, how much work is left to convert to a free-market rate? Would it make a major impact on peoples' lives? Has, in fact, most of the hard work in moving to a free-market rate already been done?

I still believe completely dollarizing is just for show, a lot of work and a big risk for not much return. It's not just that there's a built-in inflationary trend as people round prices up due to the lack of small change, but the opportunities for corrupt insider trading, as well as a one-off price jump at the conversion are enormous.

Actually, Milei needs to talk both the economy and the Peso down, imagine, if the free-market with all the aggregated managed rates plus the official rate settled at say 600-800 Pesos / Dollar rather that the 1600 that's been mentioned, he'd need twice the Dollar amount to convert the banknotes in circulation. He'd look pretty stupid if that happened.

 

[QuiloBa]

How much of the economy operates, and is affected by using the official Dollar exchange rate? Given that we have the free-market Blue Dollar rate, and (I read) up to 17 managed rates like the CCL, MEP, Qatar, Soya, Wine Dollars and so on, which are in varying degrees closer to the Blue Dollar, how much work is left to convert to a free-market rate? Would it make a major impact on peoples' lives? Has, in fact, most of the hard work in moving to a free-market rate already been done?

I still believe completely dollarizing is just for show, a lot of work and a big risk for not much return. It's not just that there's a built-in inflationary trend as people round prices up due to the lack of small change, but the opportunities for corrupt insider trading, as well as a one-off price jump at the conversion are enormous.

Actually, Milei needs to talk both the economy and the Peso down, imagine, if the free-market with all the aggregated managed rates plus the official rate settled at say 600-800 Pesos / Dollar rather that the 1600 that's been mentioned, he'd need twice the Dollar amount to convert the banknotes in circulation. He'd look pretty stupid if that happened.

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 sh*t 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.

 

[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 sh*t 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.

 

[FrankPintos]

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 sh*t 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