Argentina tightening up capital controls

swissaustrian

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That looks pretty well organized to me, everyone is holding the same signs and balloons. So who is organizing this?

 

pmbug

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It's hard to tell exactly, but I think a lot of those "signs" are actually Argentine flags (the ones with blue and white anyways).
 

pmbug

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Two days ago we first posted a Youtube clip in which a Greek reporter asked Argentina's Economy Minister Hernan Lorenzino a simple question: "what is inflation in Argentina" - a sensitive topic to a country with price and capital controls, and where inflation ranges between 0 and 20% depending on whether one uses official, or unofficial but based on reality, data. The result was a why we dubbed the clip "Thursday humor" as after several minutes of meandering gibberish, Lorenzino concluded by telling his aided that "he wants to leave", which in turn promptly became a twitter hashtag meme #mequieroir, in which the minister's response to a simple request for the truth was promptly lampooned around the world. However, that may have been just the beginning of Hernan's problems. As Bloomberg reports, citing Clarin, Argentina's president CFK, was also quite taken aback by the bumbling economist that she met with him subsequent to the interview going viral, and told him he has lost credibility and the most likely next step is his resignation.
...
http://www.zerohedge.com/news/2013-...nterview-cost-job-argentinas-economy-minister
 

pmbug

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A lot of U.S. dollars are tucked away somewhere in Argentina, most likely in stacks of $100 bills. Seven years ago, the U.S. Treasury, working with the Federal Reserve and the Secret Service, estimated that in the early 1990s Argentines held $20 billion in cash, a number that by 2006 had grown to “perhaps $50 billion or more.” That year there was a total of about $768 billion worth of dollar-denominated cash in the world, which means that someone in Argentina held at least one out of every 15 cash dollars.

How about now? The Fed is chary with its data releases. One table in a 2012 Fed paper on demand abroad for U.S. currency tells us that the annual net inflow of commercial shipments of bills denominated in dollars to Argentina and the former Soviet Union has increased since 2006 by 500 percent. In 2011, that growth rate stood at 48 percent, while total demand for U.S. currency, in America and abroad, has increased only about 10 percent. It’s unlikely that all of that growth came from the former Soviet Union alone; otherwise, why include Argentina at all? Demand for large dollar cash transfers to Argentina since 2006, then, has outstripped demand for dollar cash overall in the world.

So it seems safe to say that today Argentines hold probably well more than $50 billion, and well more than one in every 15 dollars. ...
http://www.businessweek.com/article...in-u-dot-s-dot-currency-dot-heres-how-we-know
 

benjamen

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Interesting way to defeat inflation...
http://www.sovereignman.com/trends/...-by-launching-government-clothing-line-12197/

"Curiously, even Cristina acknowledges that prices are way too high. But rather than rein in spending and stop the money printing, she’s digging her high heels in even further by launching a new clothing line.

This new brand– NYP (Nacional Y Popular) will be owned and run by the government, selling everything from jeans to shirts to shoes at prices below 100 pesos (less than $20 officially)."

:rotflmbo:
 

benjamen

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Bad people are trying to sell excess wheat overseas instead of at the price controlled prices in Argentina:
http://www.bloomberg.com/news/2013-...at-jails-hoarders-as-bread-prices-double.html

"Argentina plans to apply a law that forces holders of wheat and flour suitable for bread making to sell stock on the domestic market in a bid to contain inflation."

"Argentina, the largest wheat producer in South America, has a domestic consumption of 6 million tons. The harvest in the 2012-2013 season was 9.8 million tons."

"Grocers agreed last month to freeze prices of 500 goods and ensure supply as part of the government’s efforts to stem inflation."

"While the national statistics agency said prices rose 10.3 percent in May from a year earlier, private economists estimated prices rose 23.4 percent in the same period."
 
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pmbug

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Thanks for the update Benjamen. What a mess.
 

Potemkin

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I wonder whether the Argentine people are buying gold and silver as well...

I heard from media that Greeks, Japanese, Germans are hoarding gold.
 

DSAbug

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I wonder whether the Argentine people are buying gold and silver as well...

I heard from media that Greeks, Japanese, Germans are hoarding gold.
The japanese have less than 1% of their assets in gold. So no.. Japan is not hording gold.
 

Aubuy

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Japan is basically broke, and they appear to have a loyal population that keeps buying their own government debt despite the risk, so if that financial ship ever goes down, they are all going to go down together. If I were Japanese I would want to have some gold coins just in case Godzilla showed up in the harbor.

and Argentina is a mess
 
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pmbug

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Argentina devalued the peso the most in 12 years after the central bank scaled back its intervention in a bid to preserve international reserves that have fallen to a seven-year low.

The peso has plunged 12.7 percent over the last two days to 7.8825 per dollar at 3:45 p.m. in Buenos Aires, after falling to as low as 8.2435, according to data compiled by Bloomberg. The decline in the peso marks a policy turn for Argentina, which had been selling dollars in the market to manage the foreign-exchange rate since abandoning a one-to-one peg with the U.S. dollar in 2002.

President Cristina Fernandez de Kirchner, who said May 6 that the government wouldn’t devalue the peso, is struggling to hold onto dollar reserves which have fallen 31 percent to $29.4 billion amid annual inflation of more than 28 percent. Reserves are the government’s only source to pay foreign creditors. Since changing her economy minister, cabinet chief and the head of the central bank on Nov. 18, the peso has fallen 25 percent, the most in the world, according to data compiled by Bloomberg.

“They’re running out of cash and they’re sitting in the corner at the moment,” Phillip Blackwood, who oversees $3.5 billion in emerging market assets as a managing partner at EM Quest Capital LLP, said in a phone interview from London. “There’s a feeling in the market that they’re not going to intervene any more.”

The tumble in the currency is the biggest since March 2002, the year the government abandoned a one-to-one peg with the U.S. dollar following a record $95 billion default.
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More: http://www.bloomberg.com/news/2014-...s-17-as-central-bank-scales-back-support.html
 

pmbug

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Argentina is to relax its strict foreign exchange controls, a day after the peso suffered its steepest daily decline in 12 years.

Cabinet chief Jorge Capitanich said the country would reduce the tax rate on dollar purchases and allow the purchase of dollars for savings accounts.

The measures would take effect from Monday, he said.
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Mr Capitanich said the government would reduce the tax rate on dollar purchases to 20% from the current 35%.

He said: "This decision reflects the government's belief that in the context of a floating exchange rate, the price of the currency - that is, the dollar - has reached an acceptable level for the objectives of economic policy."

BBC economics correspondent Andrew Walker said: "Argentina seems to be moving towards a more flexible exchange rate system, which could mean further weakness for the peso.

"That would help the country's competitiveness, but the danger is that it could aggravate what is already a serous inflation problem."
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http://www.bbc.co.uk/news/business-25877391
 

ancona

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When I look around at all of these "emerging" markets and the turmoil they are in, it becomes quite apparent that this whole "recovery" has been an artificial construct which is in rapid devolution as the world returns to its true equilibrium state.
 

pmbug

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...
Other shopkeepers chose not to wait to see the results of last week’s 15 percent depreciation, raising prices as much as 30 percent on appliances, electronics, wine and other goods that aren’t regulated by the government, while supermarkets seemed to abide by food-price accords reached earlier this month. President Cristina Fernandez de Kirchner left for Cuba over the weekend, days before the start of a regional summit, leaving top aides to try to contain price increases as investors raised bets on further declines in the peso.

“The first reaction has been a paralyzation of almost all the markets for goods and services tied to the official exchange rate,” Domingo Cavallo, who as economy minister in 1991 linked the peso to the dollar at one-to-one, said in a telephone interview from Cordoba, Argentina. “No one wants to sell merchandise at a price if they don’t know what the rate will be tomorrow.”
...

In his daily press briefing today, Capitanich said Argentine individuals who earn a monthly wage of 7,200 pesos ($900) or more will be allowed to buy dollars again starting today to build dollar savings. There will be a limit on these purchases of $2,000 per month, and they will be taxed at 20 percent unless kept in deposit for at least a year, according to a resolution on today’s official gazette.

Argentines had already been coping with annual inflation estimated at about 28 percent, the highest in Latin America after Venezuela, and currency controls that restricted access to dollars at the official exchange rate.
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More: http://www.bloomberg.com/news/2014-...ation-triggers-30-whirlpool-price-markup.html
 

pmbug

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Via translation from Lanacion, please consider Credit Is More Expensive.
Following the peso devaluation and sharp hike in interest rates by the central bank, interest rates on loans increased as much as 11 percentage points.

For a personal loan, private banks now charging at least 44% per year. Factoring in fees and other administrative expenses (up to 11 percentage points), the total financial cost exceeds 65% annually.

Public banks have with nominal rates for personal loans in pesos that range from 32% to 44%, with a total financial cost up to 55% annually.
...
http://globaleconomicanalysis.blogspot.com/2014/02/loan-rate-in-argentina-hits-65-annually.html

Ouch!
 

rblong2us

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This seems to demonstrate what a huge risk it is to borrow big and hope that, with inflation, the loan becomes easy to repay.

Dan Ammerman (somehow I get a regular email ) reckons its a better way to go as you do not get taxed on the 'increase' in $ value of the property.

When interest rates go sky high, the default rate explodes and the poor old banks end up owning everything.

Ok I got away with it and was just about able to weather the 15% interest times but many were forced to walk away.
 

DoChenRollingBearing

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...

Argentina seems to be reaching LONG to screw itself. What, for about a week now there has been bad news from there nearly every day. Yet they keep voting these SOBs (well in her case that would be a DOB...) in, who are even worse than ours are.

***

I just got back from Costa Rica. I talked with EIGHT natives there (taxi drivers, shopkeepers, etc.) who told me business and the economy are BAD. I have been there about six times, and that is the first time I have heard that. Four of them told me that they blamed their Socialist president... A bit fewer tourists, but we saw plenty, all things considered.

I also talked with a few ex-pats there. They're not rockin'-and-rollin' either. But I did learn that they have my old friends the Black Widow spiders there (that's a long and nasty story...) as well as the famous "Fer de Lance" poisonous snake that I had previously thought was an Amazonian-only thing... The Fer de Lance is really bad, apparently you only have minutes to get to a hospital or you DIE!

And a guy I know sells capital equipment (pumps and machinery for chemical plants and similar) to LatAm. He told me the other day that almost every country is down in LatAm, the only exceptions being Peru and Colombia. Even Mighty Chile is just about even, not up nor down.

***

So, it's not just Argentina, but all kinds of places are not happy: Turkey, Brazil, India, Russia, Thailand, Portugal, Italy, Greece, Spain, France (?) and it looks like CHINA too.

Gold and CA$H. Simple!
 
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