TonyTigre
Well-known member
Three months later you have:
Blue 1425
CCL 1474
MEP 1430
Official 1441
...and Western Union at 1477.
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If the Argentina peso is truly overvalued
- Thread starter TonyTigre
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- argentina overvalued peso
Blue 1425
CCL 1474
MEP 1430
Official 1441
...and Western Union at 1477.
Calgary Foodie
Active member
It has been holding stable. I wonder if the War will disrupt things at all.
The price of oil over the last 24 hours has been wild!
This is what no one can explain to me either when I ask them how this is sustainable. Imagine prices for us expats that have more money are tough. I can't fathom what it is like making a peso income. Only ones that seem like they are getting big raises are the politicians that voted themselves nice fat raises and bonuses.
I think it's funny how Caputo and Milei and their team tell all the Argentines to deposit their cash into Argentine banks when most of these guys have all their cash stashed OUTSIDE Argentina. Look at one of Milei's top guys with a huge increase in his net worth since taking office.
El llamativo incremento patrimonial de Sturzenegger: casi $1000 millones en un año
La declaración jurada anual del funcionario reveló también que mantiene más de 1,4 millones de dólares depositados en el exterior.
www.datadiario.com
Finance Prof
Well-known member
Yes Caputo and crew have all their cash in the US banks where it is safe. People would feel more comfortable once they bring all their cash into the system. They won't do that. They are smart enough to keep it where it is safe.This is what no one can explain to me either when I ask them how this is sustainable. Imagine prices for us expats that have more money are tough. I can't fathom what it is like making a peso income. Only ones that seem like they are getting big raises are the politicians that voted themselves nice fat raises and bonuses.
I think it's funny how Caputo and Milei and their team tell all the Argentines to deposit their cash into Argentine banks when most of these guys have all their cash stashed OUTSIDE Argentina. Look at one of Milei's top guys with a huge increase in his net worth since taking office.
El llamativo incremento patrimonial de Sturzenegger: casi $1000 millones en un año
La declaración jurada anual del funcionario reveló también que mantiene más de 1,4 millones de dólares depositados en el exterior.
Finance Prof
Well-known member
This is a very good read.
eleconomista.com.ar
Summary below:
The Bottom Line: The author concludes that maintaining this exchange rate lag will inevitably drain the Central Bank's reserves and pressure the trade balance. Eventually, this forces the government into a familiar, painful dilemma: either execute a sudden, highly inflationary currency devaluation, or try to hold the "anchor" until the reserves completely dry up.
El dólar bajó 5% en dos meses, pero la inflación fue 6%: la paradoja que nadie en el Gobierno quiere explicar
El consenso de LatinFocus proyecta que el dólar avanzará 17,9% en todo 2026 —según el REM de febrero— contra una inflación proyectada de entre 24% y 26% según distintas consultoras.
eleconomista.com.ar
Summary below:
The Core Paradox: The "Exchange Rate Anchor"
The article highlights a recurring paradox in Argentine economic policy: using a managed exchange rate as a nominal anchor to fight inflation often ends up fueling a new crisis. Currently, the Argentine peso is appreciating in real terms because domestic inflation is running significantly higher than the nominal changes in the official exchange rate. This creates an "exchange rate lag" (atraso cambiario) that harms the productive sector by squeezing profit margins, shrinking markets, and threatening employment.The Mechanism of Deterioration
To understand the severity of the lag, the author compares effective inflation (measured by INDEC) with the official exchange rate (Banco Nación).- The Math: In the first two months of 2026, the official exchange rate actually fell by 5% in nominal terms. However, inflation over that same period accumulated to roughly 5.8%.
- The Result: This translates to a real appreciation of the peso by more than 10 percentage points in just 60 days. Market consensus projects the dollar to advance only 17.9% throughout 2026 against a projected annual inflation of 24% to 26%, locking in a structural exchange rate lag for the year.
External and Geopolitical Pressures
The domestic lag is being aggressively worsened by two external factors:- Global Currency Dynamics: A globally strong US dollar and rising US Treasury yields (up to 4.3%) are depreciating the currencies of Argentina's main trading partners (like Brazil, China, and the Eurozone). Because Argentina's peso remains artificially firm, the country is losing competitiveness on two fronts simultaneously.
- The Energy Shock: Geopolitical tensions are raising fears of oil reaching $150 per barrel. This acts as "imported inflation," driving up transportation and energy costs locally. The author describes this as "second-order stagflation"—prices are rising due to supply-side shocks rather than high demand, all while industrial activity shrinks.
Sectoral Winners and Losers
The damage across the economy is highly uneven:- The Losers (Industry): Sectors like textiles and footwear are being crushed by cheap Asian imports because local peso-based costs are too high. The metal-mechanic sector is heavily losing its export competitiveness to Brazil because the Brazilian real has depreciated while the peso has not.
- The Illusion of Success: The agricultural and energy sectors, whose prices are fixed in international markets, have a natural cushion. Their massive trade surpluses mask the underlying deterioration of the broader industrial economy, leading some to incorrectly claim there is no exchange rate problem.
- The Medium-Term Threat: The greatest risk isn't just lost sales, but disinvestment. Companies cannot project profitability in dollars, so they stop investing in domestic capacity.
The Warning Signs (ITCRM)
The Central Bank’s Multilateral Real Exchange Rate Index (ITCRM) currently sits at around 88 points. For context, the historical average over the last 23 years is around 120.8. This represents a massive 30-point deficit in historical competitiveness, placing the real exchange rate at levels not seen since the late Kirchner era in 2015.The Bottom Line: The author concludes that maintaining this exchange rate lag will inevitably drain the Central Bank's reserves and pressure the trade balance. Eventually, this forces the government into a familiar, painful dilemma: either execute a sudden, highly inflationary currency devaluation, or try to hold the "anchor" until the reserves completely dry up.
Blockchain
Well-known member
That doesn't mean it is fair value @TonyTigre. If they are so sure why won't they fully lift the currency controls for companies?
JP Morgan basically said the government's fantasy of 10% annual inflation isn't happening.
- JP Morgan's recommendations for Argentina to reduce annual inflation to 10-15% by lifting capital controls, advancing tax-cutting reforms, and completing relative price adjustments amid ongoing economic stabilization efforts.
Who really believes that inflation was only 2.9% last month. Come on.
TonyTigre
Well-known member
2026: Labor reforms, cut regulations, cut taxes, fight attempts by others to manipulate the exchange rate.
2027: Do not focus on a budget surplus. Increase government spending. Focus on getting reelected. Target additional tax cuts that will be felt right away.
The message to get reelected is simple: If you don't reelect me, all the hardship in the past few years will be for nothing. The peso will collapse and you go straight back on the fast track to hyperinflation. If I get reelected, rolling over the debts due in coming years will be easy and at low rates. Foreign investments will accelerate. All the projects under RIGI that haven't started will move forward. More tax cuts, more job opportunities, lower prices.
Argentina's Incentive Regime for Large Investments (RIGI)
32 projects
US$ 69.2 billion
134,000 jobs
US$40.27 billion in potential exports
Trade surplus US$45 billion by 2030, US$75 billion by 2035
2027: Do not focus on a budget surplus. Increase government spending. Focus on getting reelected. Target additional tax cuts that will be felt right away.
The message to get reelected is simple: If you don't reelect me, all the hardship in the past few years will be for nothing. The peso will collapse and you go straight back on the fast track to hyperinflation. If I get reelected, rolling over the debts due in coming years will be easy and at low rates. Foreign investments will accelerate. All the projects under RIGI that haven't started will move forward. More tax cuts, more job opportunities, lower prices.
Argentina's Incentive Regime for Large Investments (RIGI)
32 projects
US$ 69.2 billion
134,000 jobs
US$40.27 billion in potential exports
Trade surplus US$45 billion by 2030, US$75 billion by 2035
import export
Well-known member
This is a good summary. There aren't any serious competitors out there. Many are frustrated but fortunately for Milei the other side is a mess. Agree about not getting too caught up in budget surplus in 2027. Not sure people will be so forgiving by 2027. Have to see how the rest of 2026 goes. RIGI announcements doesn't translate into automatic investments.
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