If the Argentina peso is truly overvalued

[Joe]

Some great posts. I also think Argentina is too dependent on the United States right now. Trump and Milei are best friends but that will be a tremendous liability for Milei even if he manages to stay in office and the Republicans take over They will use that friendship to punish Argentina and Milei.

I don't know how anyone can feel like things are going well here. The mood is dampening. The economy outside of a few pockets is terrible. Stores and restaurants are closing, inflation is on an upswing and going up, Milei is lying about true inflation numbers, job losses are very high, prices are totally crazy for local wage levels. What do you think would happen without the IMF and USA's swap help?

The INDEC thing is a real sign how poorly things are going if they have to go to that level. There is support in the peso because of the $20 billion swap line which is assumed if things go south they can tap into. That is going to cause a floor for the peso. It is doing it's job of keeping people shorting the peso or trying to speculate against it away.

No one should believe anything now from the government. The inflation numbers are a lie. I don't even trust the Central Bank. How anyone can believe that the peso is truly valued at these levels is beyond me. This is not organic. It's all manufactured.

Look at the price of things, utilities, beef, dining out. Exploding up. My condo fee each month continues to go up. The government had to work with banks for people to get loans to pay their condo bills. That is not natural and I have never seen that in Argentina before.

I like Argentina no matter what is going on and own an apartment here and spend 6 months out of the year here. Things here can stay expensive for a while and probably why many have left.

For all of this talk about things here improving I don't see it. Besides being able to order a few things online a little cheaper, everything is still broken here. Now the government has resorted to lying like Cristina did. Put a fork in this..it is eventually going to be done.

Hit the nail on the head! Trump is helping Argentina now but if the Democrats take over in 2 years forget about it. I think it will be the perfect storm for Milei and Argentina. You won't have Bessent or Trump helping out. From what I can see Trump isn't doing too well. Many that I know that voted for him and Republicans are not happy with the direction things are taking.

The central bank might be building reserves but is anyone really seeing the benefits at all? Things seem to have gone from bad to worse besides some products coming in. I don't buy the argument that inflation has slowed down. Sure on many things like at supermarket and some other things but for the everyday person everything is much more than Milei started. And I'm not talking just a little. Electricity is up 4X, same as gas and water seems much more too. I don't pay the monthly HOA fees but I can see it in the mail as it's slipped under my door in my rental and it keeps going up too.

@Johnny posted his monthly apartment dues and just in the past year they skyrocketed. Gas is more too. Restaurants have become unaffordable. So how is the typical person benefitting? Was it like this too when the peso was $1:1? I wasn't here then. How was it then?

Besides a few sectors like oil exploration, mining, banks and financial sector there aren't too many that are doing better at least from what I can see. Some were willing to take it in the ass to see Argentina improve but not sure how good things are with Milei's family stealing from the welfare program, them lying about inflation, crypto scandal that it Is obvious he got caught.

I like a lot of what this government is doing and they need more reforms. But I think Milei went overboard on all of these increases. Too much too soon and they aren't stopping. 2X ok. 3X ouch, 4X brutal. No one wants to go back to how it was before with sky high inflation but it is impossible to keep raising prices on everything and salaries not keeping up inflation without things crashing.

I don't know how anyone can really argue that the peso should be this strong. Argentina is feeling the pain but they will eventually feel more pain.

 

[Dick]

NOTHING works in this country well. Nothing. Read my post about buying my apartment here. It was a nightmare. Pure chaos! Like nothing you can imagine. And the lack of respect here is like nothing I have seen anywhere else. How do people put up with such noise? Dogs barking, music blasting all hours of the night, people smoking pot inside. I can go on and on.

Long lines at the grocery store. Even furnishing my place has been an exercise in patience. No furniture in stock, paying a large deposit with no guarantee the place won't go out of business, difficult to find dependable service providers.

I am surprised that a city of this size in this day and age works so poorly. I will be happy when I am all done getting my property all set up and I don't have to deal with this chaos.

 

[JonJLA]

NOTHING works in this country well. Nothing. Read my post about buying my apartment here. It was a nightmare. Pure chaos! Like nothing you can imagine. And the lack of respect here is like nothing I have seen anywhere else. How do people put up with such noise? Dogs barking, music blasting all hours of the night, people smoking pot inside. I can go on and on.

Long lines at the grocery store. Even furnishing my place has been an exercise in patience. No furniture in stock, paying a large deposit with no guarantee the place won't go out of business, difficult to find dependable service providers.

I am surprised that a city of this size in this day and age works so poorly. I will be happy when I am all done getting my property all set up and I don't have to deal with this chaos.

Dick based on my experiences (I have bought 2 properties since 2003) is it's all local connections. Argentina is almost impossible for anyone going at it alone. But it is a breeze if you have local connections. I bought 2 properties without even seeing them in person before I bought them. I had them both furnished and decorated and also sold one of them remotely. I used @BuySellBA to handle all of it.

You might think you are saving money trying to do it all alone but you will pull your hair out. I have had friends that felt just like you did but the mistake they made was trying to do it all themselves. Argentina is very different than anywhere on Earth.

 

[oil rush]

Hit the nail on the head! Trump is helping Argentina now but if the Democrats take over in 2 years forget about it. I think it will be the perfect storm for Milei and Argentina. You won't have Bessent or Trump helping out. From what I can see Trump isn't doing too well. Many that I know that voted for him and Republicans are not happy with the direction things are taking.


Besides a few sectors like oil exploration, mining, banks and financial sector there aren't too many that are doing better at least from what I can see. Some were willing to take it in the ass to see Argentina improve but not sure how good things are with Milei's family stealing from the welfare program, them lying about inflation, crypto scandal that it Is obvious he got caught.

I like a lot of what this government is doing and they need more reforms. But I think Milei went overboard on all of these increases. Too much too soon and they aren't stopping. 2X ok. 3X ouch, 4X brutal. No one wants to go back to how it was before with sky high inflation but it is impossible to keep raising prices on everything and salaries not keeping up inflation without things crashing.

I don't know how anyone can really argue that the peso should be this strong. Argentina is feeling the pain but they will eventually feel more pain.

Impossible to really know if this time is different or not. Fundamentally different what they are doing this time around. However, I just don't think people will have enough patience. Most that I know are already losing patience. Unemployment is going up, governmental projects in each State totally stalled or ended, import explosion, dying industries and on and on.

This kind of turn around takes a decade.

 

[Peabody]

Impossible to really know if this time is different or not. Fundamentally different what they are doing this time around. However, I just don't think people will have enough patience. Most that I know are already losing patience. Unemployment is going up, governmental projects in each State totally stalled or ended, import explosion, dying industries and on and on.

This kind of turn around takes a decade.

It's also impossible to know how things will go when the President keeps getting busted for stealing or all his buddies are getting with their hand in the cookie jar.

 

[TonyTigre]

If the Argentina peso is truly overvalued, why is the blue dollar rate lower than CCL, MEP, and Official? Didn't people used to say the Blue rate is the one not manipulated by the government?

At the moment of posting the rates are:
Blue 1425
CCL 1512
MEP 1475
Official 1463

FYI, Western Union tracks the CCL , not the Blue rate as many continue to mistakenly believe.

Two months later you have;
Blue 1430
CCL 1480
MEP 1439
Official 1446
...and Western Union at 1483.

 

[Piranha]

Two months later you have;
Blue 1430
CCL 1480
MEP 1439
Official 1446
...and Western Union at 1483.

I have been playing the peso game and it has worked out well. Getting 26% return on my savings account. Can pull out at any time. I figure it will be good until it's not good.

 

[Bettina]

No this is NOT like before the corralito. Back then life was very good. I remember traveling all over the world. We made great incomes and cost of living for us was reasonable. This not like today. Now everything expensive and salaries are very low.

No one have money to spend. Look at tuition rate. Expensive! Everyone was better off when it was $1 to 1. Far from it today. Things are terrible now!

This is what I have been told by others as I was curious and they said back then although it was expensive people were making a lot more money. Like USA type wages back then. So big difference.

 

[CraigM]

This is what I have been told by others as I was curious and they said back then although it was expensive people were making a lot more money. Like USA type wages back then. So big difference.

I suspect a big part of that is just economic decay. A lot of rot can set in over 25 years when your government has been making questionable decisions going back decades.

 

[lemonade]

I suspect a big part of that is just economic decay. A lot of rot can set in over 25 years when your government has been making questionable decisions going back decades.

True but I just don't understand how this economic plan is going to work at least in the short term (2 more years of Milei's term). US type prices (and many things even more expensive than the USA) and salaries at piss poor levels. It doesn't make sense and not sustainable. No matter what rationale someone tries to give me people still can't explain how this is going to work out in the long run?

 

[Sylvia]

The USD has been falling all over Latin America not just Argentina.

El dólar no sólo cae en la Argentina: qué pasa con otras monedas emergentes y cuáles son las causas

La baja en la moneda estadounidense es un fenómeno global que afecta también al siempre relevante real brasileño, entre muchas otras monedas

www.infobae.com

 

[Used]

Dollar vs. peso: Why is the dollar strong? It’s because the U.S. economy is strong. Why is the peso weak? Because Argentina’s economy is weak. If all currencies moved the same against the dollar, there would be arbitrage opportunities.

Currency controls: Argentina has practically no currency controls now. It’s nothing like it was in previous years. Not totally free but still a big improvement from before Milei started.

Peso strength: Despite buying around $1.5+ billion, the peso has strengthened, not weakened.

Foreign investment: Major international companies are investing in mining, lithium, oil, and agriculture. These are not small or speculative players.

Investment security (RIGI): The RIGI law is now in place, which protects large investments. This is very different from places like Venezuela.

Bank financing: Banks offered less financing because they still see risk. There is no U.S. government guarantee behind the loans.

Country risk: Country risk dropped from over 1,800 to around 500. That’s a huge improvement.

Economic turnaround: Argentina is now running a fiscal surplus and paying its debts. That’s a major shift from the past.

Political stability: Milei performed better than expected in the midterms, and there’s no strong opposition forming. In fact, I can't see any viable alternative. Can anyone else?

Growth concerns: Some say growth will slow, but if that were true, Milei wouldn’t be expected to win in 2027.

Currency policy: The government is buying dollars to build reserves and pay debt while reducing pesos in circulation to fight inflation. The peso is trading within normal levels.

This all sounds like improvements.