4 ms·

It's not just the government. There's a broader problem, including unpayable loans from the IMF, lack of dollars leading to restrictions, some things are traded

by the_af 4y ago

It's not just the government. There's a broader problem, including unpayable loans from the IMF, lack of dollars leading to restrictions, some things are traded in dollars since our last dictatorship (e.g. real estate) and this is difficult to change, and widespread speculation of our agricultural sector (one of the most powerful groups in Argentina). Also: the black market of dollars is relatively small and also easily manipulated, but generates panic in people's minds.

kragen 4y ago
As this comment illustrates, partisan propaganda in Argentina is effective at getting much of the population to blame anybody except the ruling party, who somehow believe that "widespread speculation" is something that doesn't happen in countries like the US, the UK, Taiwan, Japan, etc. The current ruling party (the one that likes to blame the agricultural sector) just signed up for some new unpayable loans from the IMF last month.
- the_af 4y ago
  Please follow HN's guidelines and be respectful. I've no particular respect for the current government, and I did mention "it's not just the government", meaning I believe part of the blame is theirs. Do you deny the agricultural sector is one of the most powerful in Argentina, and one that speculates on the dollar and has a vested interest in it going higher? Do you deny the illegal dollar market is relatively small but has a high impact in people's minds? Do you deny the real estate sector trades in dollars? > As this comment illustrates, partisan propaganda Your comment is autological!
  - argentinian 4y ago
    Prices of commodities are expressed in dollars and are global. The agricultural sector thinks in dollars, not in pesos. It's not that the dollar goes higher: the peso goes down. The illegal dollar market is not small, and its prices change similarly to the legal dolar market (mep, ccl).
    - the_af 4y ago
      The illegal dollar market is not where major operations are done, and so, it doesn't affect anything to a great degree. It's small in the sense a few big whales can manipulate it. > It's not that the dollar goes higher: the peso goes down. Well, yes. If you are from Argentina, you know what I meant. If the agricultural sector only "thinks in dollars", then why do they regularly push for a peso devaluation, talk about "competitivity" of the peso vs the dollar, and must be forced to liquidate their dollars in a reasonable time? They obviously care about the relative value of the peso vs the dollar.
      - argentinian 4y ago
        The main actors pushing for the peso devaluation are the ones that finance deficit by printing money.
      - kragen 4y ago
        Why "must" the agricultural sector be forced to "liquidate" their dollars "in a reasonable time"? By "liquidate" you presumably mean "sell for pesos", and the answer is that pesos are an irresponsible speculative investment that nobody would invest in voluntarily. It only goes down, and it does so with enormous volatility. The only reasonable time to do this is less than one day before spending the pesos. So the answer is the same as if a mugger asks why you must be forced to give me all the money in your wallet, receiving nothing in return. The implied necessity is an invention of the speaker. I don't believe you have reliable information about the size of the illegal dollar market.
        argentinian 4y ago
        Yes. The grains that somebody produces are their private property. Why does the government have to force the owners to sell their own property?
        kragen 4y ago
        To quibble a bit, they're actually not being forced to sell the grains and oilseeds, which for the time being they are free to stockpile; but if they do sell them, they are being forced to sell the dollars they get in exchange, at a fraudulent exchange rate, in order to subsidize imports and the overseas travel of the Argentine upper class.
  - kragen 4y ago
    Surely it is true that my own views are also influenced by partisan propaganda. :) However, I think a much stronger influence is that I understand elementary economics, have lived outside Argentina, have operated an Argentine corporation, and have traded forex futures in real markets. Certainly it is true that the agricultural sector is one of the most powerful in Argentina and that the real estate sector trades in dollars, but most of the rest of your comment is not even wrong, reflecting fundamental misunderstandings of a flat-earth level. The assertion that the agricultural sector in Argentina is "speculating on the dollar" is incoherent. Speculating on the dollar is an activity dominated by big international investment banks and hedge funds, which make enormous leveraged bets on whether the dollar, the yen, the euro, or other real currencies will go up or down by 0.05%. The agricultural sector in Argentina is not able to do this because of legal prohibitions, and at any rate does not have nearly enough money to engage in the activity profitably. When people in Argentina talk about the dollar "going higher" what they mean is that the fake Monopoly money we call the Argentine peso is losing value relative to the dollar, whose own changes in value are usually a rounding error by comparison, though not this year. Argentine pesos are an irresponsible speculative investment that are guaranteed to lose value; no prudent investor would hold them. Anybody who owes debts denominated in Argentine pesos—most notably, the government—has a vested interest in inflation, the devaluation of the peso ("the dollar going higher"). Conversely, anyone who is owed debts denominated in Argentine pesos has a vested interest in the peso appreciating, or, since that's not going to happen, in the peso losing value more slowly. However, overall, the rampant inflation of the peso is one of the factors that makes the Argentine economy unstable and unproductive, which is the bigger factor in play here. I suspect your reasoning is something along the lines of "the agricultural sector is a big exporter, so they get paid in dollars, so if those dollars are worth AR$600 instead of AR$300 then they make more money." But that is nonsense; if a dollar is "worth" AR$600 instead of AR$300, that's because the peso has lost half its value, so that AR$600 only buys you roughly the same amount of fertilizer, Monsanto seeds, farmhand labor, silage bags, etc., that you could have bought with the AR$300 without the additional inflation. Moreover when inflation is fast enough it becomes difficult to carry out any transactions at all. It's relevant to point out to other readers that the official dollar, the fake value the exporters of agricultural as well as other goods get paid, is AR$129.25 × AR$137.25 today. That means that for every dollar of soybeans you export legally, you get paid AR$129.25, which is "worth" US$0.41. That is, the central bank confiscates 59% of your revenues (not your profits!) in order to subsidize imports and rich people going abroad for vacations. Unfortunately, soybeans are too bulky to smuggle out of the country. Government confiscation of 59% of export revenues in order to subsidize Chinese imports goes a long way to explaining how we have ended up in such a terrible economic situation. Argentine makers trying to compete with Chinese imports have the central bank subsidizing 57% of the price of their foreign competition; Argentine consumers only pay 43% (137.25/316). So a hypothetical Argentine product of the same quality must be 57% cheaper than the Chinese product in order to compete. Government mandates of "Industria Argentina" result in companies importing fully manufactured products in kit form from China or Korea and paying unskilled workers a minimal amount to assemble the kits. Export-led industrialization was the key policy that replaced poverty with prosperity in Taiwan, Japan, PRC, Korea, Indonesia, Singapore, and Malaysia. The Argentine currency policy has been precisely the opposite since *spit* Menem, with brief exceptions under Kirchner and *spit* Macri. Even back to Perón we focused on import substitution rather than exports, although actively sabotaging exporters with monetary policy seems to have started with Menem. I don't have any idea how big the illegal dollar market is, and neither do you, but it evidently possesses significant liquidity. It has a high impact in people's minds because it's a reliable source of information about what the peso is actually worth; the government has not been a reliable source of that information since Kirchner coerced INDEC into falsifying the inflation numbers, a policy that has continued under Fernández de Kirchner, Macri, and Fernández and which was followed with the "cepo" policy of fake exchange rates that have gutted the Argentine economy over the past 11 years. Hopefully that answers all of the questions you asked adequately; please feel free to ask for clarification if you feel that any of my answers were incomplete.
mixedCase 4y ago
But it is, just the government. They refuse to cut down on deficit spending, keep a hopelessly intractable tax system, and they keep the money printer running non-stop to keep up. It doesn't help that they keep one of the most unenviable levels of corruption, either. And it's not limited to the current government, their previous one was woefully incompetent at fixing deficit spending. But it can't also be denied that the party in power is the one that refuses under any circumstance to address the underlying cause. Everything else you mentioned: Loans, bank runs, rampant inflation impacting land value, and business trying to protect their investments from the governments' byzantine rules and outright thievery through price controls that expects them to produce at a loss, is just a byproduct of government policy that is rotten to the core and a population that keeps electing the same incompetent buffoons that do not dare or desire to make the necessary changes.
- the_af 4y ago
  > But it is, just the government. I really don't think it is just the government, nor is it the lack of cutting down deficit spending, nor the tax system. I try to take a more historically grounded view. I don't think there are easy answers though. I believe the view that "there's the government, and there's this bunch of innocent businessmen at the mercy of big bad government" is not very compelling, for various reasons. One is that democratic governments in Argentina are pretty weak, all things considered; they aren't all-powerful, they usually have an opposition running interference at every step, US-style. Another is that when some businessmen had their chance to run their own government (you mentioned one recent occasion, the dictatorship was another) they still screwed up.
  - argentinian 4y ago
    The dictatorship is 'some businessmen' to you? That's an strange interpretation. And Macri's business become big thanks to its links to government (you can check the story of 'grupo macri' in wikipedia).
    - the_af 4y ago
      > The dictatorship is 'some businessmen' to you? Yes. The actual men in green uniforms were just the visible face of the dictatorship. There were actual businessmen behind their economic policies. Not for nothing the dictatorship is called the civic-military dictatorship, as you well know if you are from Argentina. > And Macri's business become big thanks to its links to government I'm well aware of Macri's corruption and its links to the government. It's ironic, really -- those who benefited the most from government ties are so quick to decry "government corruption". Such is the history of corruption, too: one foot in the government, one foot outside of it. Both parts are important. I think, historically, the government is the weaker part in Argentina, at the beck and call of those actually calling the shots.
wbsss4412 4y ago
How can you verify the actual size of the black market dollar?
- the_af 4y ago
  You can infer it. The most important thing is that major operations are not done in this market, obviously. Also, bizarrely enough the location of all "cuevas" (which is what we call the physical places where the illegal market operates) are well known by the authorities and could be shut down if they so wished. So there is definitely that in favor of the "the government is corrupt" argument.
  - wbsss4412 4y ago
    Crypto advocates on this forum frequently list Argentina as a specific use case ( ie getting around foreign currency rules/restrictions ), that would imply that the market doesn’t just happen in “Cuevas”
    - the_af 4y ago
      I admit I'm not too familiar with the (illegal) crypto thing. I wouldn't be surprised if it was run by the same cuevas. In any case, the situation I describe is historic; the cuevas have existed for decades and nobody does anything about them. As for the size: again, major operations -- the kinds that actually "move the needle" -- are done in the legal market. I seriously doubt crypto has any impact in Argentina.
      - wbsss4412 4y ago
        Realistically I think the biggest impact is that people are hoarding dollars in offshore accounts rather than converting their currency.
    - valcron1000 4y ago
      Exactly this. Thanks to cryptocurrencies we can avoid a lot of this madness

by the_af 4y ago

kragen 4y ago

As this comment illustrates, partisan propaganda in Argentina is effective at getting much of the population to blame anybody except the ruling party, who somehow believe that "widespread speculation" is something that doesn't happen in countries like the US, the UK, Taiwan, Japan, etc. The current ruling party (the one that likes to blame the agricultural sector) just signed up for some new unpayable loans from the IMF last month.

the_af 4y ago
Please follow HN's guidelines and be respectful. I've no particular respect for the current government, and I did mention "it's not just the government", meaning I believe part of the blame is theirs. Do you deny the agricultural sector is one of the most powerful in Argentina, and one that speculates on the dollar and has a vested interest in it going higher? Do you deny the illegal dollar market is relatively small but has a high impact in people's minds? Do you deny the real estate sector trades in dollars? > As this comment illustrates, partisan propaganda Your comment is autological!
- argentinian 4y ago
  Prices of commodities are expressed in dollars and are global. The agricultural sector thinks in dollars, not in pesos. It's not that the dollar goes higher: the peso goes down. The illegal dollar market is not small, and its prices change similarly to the legal dolar market (mep, ccl).
  - the_af 4y ago
    The illegal dollar market is not where major operations are done, and so, it doesn't affect anything to a great degree. It's small in the sense a few big whales can manipulate it. > It's not that the dollar goes higher: the peso goes down. Well, yes. If you are from Argentina, you know what I meant. If the agricultural sector only "thinks in dollars", then why do they regularly push for a peso devaluation, talk about "competitivity" of the peso vs the dollar, and must be forced to liquidate their dollars in a reasonable time? They obviously care about the relative value of the peso vs the dollar.
    - argentinian 4y ago
      The main actors pushing for the peso devaluation are the ones that finance deficit by printing money.
    - kragen 4y ago
      Why "must" the agricultural sector be forced to "liquidate" their dollars "in a reasonable time"? By "liquidate" you presumably mean "sell for pesos", and the answer is that pesos are an irresponsible speculative investment that nobody would invest in voluntarily. It only goes down, and it does so with enormous volatility. The only reasonable time to do this is less than one day before spending the pesos. So the answer is the same as if a mugger asks why you must be forced to give me all the money in your wallet, receiving nothing in return. The implied necessity is an invention of the speaker. I don't believe you have reliable information about the size of the illegal dollar market.
      - argentinian 4y ago
        Yes. The grains that somebody produces are their private property. Why does the government have to force the owners to sell their own property?
        kragen 4y ago
        To quibble a bit, they're actually not being forced to sell the grains and oilseeds, which for the time being they are free to stockpile; but if they do sell them, they are being forced to sell the dollars they get in exchange, at a fraudulent exchange rate, in order to subsidize imports and the overseas travel of the Argentine upper class.
- kragen 4y ago
  Surely it is true that my own views are also influenced by partisan propaganda. :) However, I think a much stronger influence is that I understand elementary economics, have lived outside Argentina, have operated an Argentine corporation, and have traded forex futures in real markets. Certainly it is true that the agricultural sector is one of the most powerful in Argentina and that the real estate sector trades in dollars, but most of the rest of your comment is not even wrong, reflecting fundamental misunderstandings of a flat-earth level. The assertion that the agricultural sector in Argentina is "speculating on the dollar" is incoherent. Speculating on the dollar is an activity dominated by big international investment banks and hedge funds, which make enormous leveraged bets on whether the dollar, the yen, the euro, or other real currencies will go up or down by 0.05%. The agricultural sector in Argentina is not able to do this because of legal prohibitions, and at any rate does not have nearly enough money to engage in the activity profitably. When people in Argentina talk about the dollar "going higher" what they mean is that the fake Monopoly money we call the Argentine peso is losing value relative to the dollar, whose own changes in value are usually a rounding error by comparison, though not this year. Argentine pesos are an irresponsible speculative investment that are guaranteed to lose value; no prudent investor would hold them. Anybody who owes debts denominated in Argentine pesos—most notably, the government—has a vested interest in inflation, the devaluation of the peso ("the dollar going higher"). Conversely, anyone who is owed debts denominated in Argentine pesos has a vested interest in the peso appreciating, or, since that's not going to happen, in the peso losing value more slowly. However, overall, the rampant inflation of the peso is one of the factors that makes the Argentine economy unstable and unproductive, which is the bigger factor in play here. I suspect your reasoning is something along the lines of "the agricultural sector is a big exporter, so they get paid in dollars, so if those dollars are worth AR$600 instead of AR$300 then they make more money." But that is nonsense; if a dollar is "worth" AR$600 instead of AR$300, that's because the peso has lost half its value, so that AR$600 only buys you roughly the same amount of fertilizer, Monsanto seeds, farmhand labor, silage bags, etc., that you could have bought with the AR$300 without the additional inflation. Moreover when inflation is fast enough it becomes difficult to carry out any transactions at all. It's relevant to point out to other readers that the official dollar, the fake value the exporters of agricultural as well as other goods get paid, is AR$129.25 × AR$137.25 today. That means that for every dollar of soybeans you export legally, you get paid AR$129.25, which is "worth" US$0.41. That is, the central bank confiscates 59% of your revenues (not your profits!) in order to subsidize imports and rich people going abroad for vacations. Unfortunately, soybeans are too bulky to smuggle out of the country. Government confiscation of 59% of export revenues in order to subsidize Chinese imports goes a long way to explaining how we have ended up in such a terrible economic situation. Argentine makers trying to compete with Chinese imports have the central bank subsidizing 57% of the price of their foreign competition; Argentine consumers only pay 43% (137.25/316). So a hypothetical Argentine product of the same quality must be 57% cheaper than the Chinese product in order to compete. Government mandates of "Industria Argentina" result in companies importing fully manufactured products in kit form from China or Korea and paying unskilled workers a minimal amount to assemble the kits. Export-led industrialization was the key policy that replaced poverty with prosperity in Taiwan, Japan, PRC, Korea, Indonesia, Singapore, and Malaysia. The Argentine currency policy has been precisely the opposite since *spit* Menem, with brief exceptions under Kirchner and *spit* Macri. Even back to Perón we focused on import substitution rather than exports, although actively sabotaging exporters with monetary policy seems to have started with Menem. I don't have any idea how big the illegal dollar market is, and neither do you, but it evidently possesses significant liquidity. It has a high impact in people's minds because it's a reliable source of information about what the peso is actually worth; the government has not been a reliable source of that information since Kirchner coerced INDEC into falsifying the inflation numbers, a policy that has continued under Fernández de Kirchner, Macri, and Fernández and which was followed with the "cepo" policy of fake exchange rates that have gutted the Argentine economy over the past 11 years. Hopefully that answers all of the questions you asked adequately; please feel free to ask for clarification if you feel that any of my answers were incomplete.

mixedCase 4y ago

But it is, just the government. They refuse to cut down on deficit spending, keep a hopelessly intractable tax system, and they keep the money printer running non-stop to keep up. It doesn't help that they keep one of the most unenviable levels of corruption, either. And it's not limited to the current government, their previous one was woefully incompetent at fixing deficit spending. But it can't also be denied that the party in power is the one that refuses under any circumstance to address the underlying cause. Everything else you mentioned: Loans, bank runs, rampant inflation impacting land value, and business trying to protect their investments from the governments' byzantine rules and outright thievery through price controls that expects them to produce at a loss, is just a byproduct of government policy that is rotten to the core and a population that keeps electing the same incompetent buffoons that do not dare or desire to make the necessary changes.

the_af 4y ago
> But it is, just the government. I really don't think it is just the government, nor is it the lack of cutting down deficit spending, nor the tax system. I try to take a more historically grounded view. I don't think there are easy answers though. I believe the view that "there's the government, and there's this bunch of innocent businessmen at the mercy of big bad government" is not very compelling, for various reasons. One is that democratic governments in Argentina are pretty weak, all things considered; they aren't all-powerful, they usually have an opposition running interference at every step, US-style. Another is that when some businessmen had their chance to run their own government (you mentioned one recent occasion, the dictatorship was another) they still screwed up.
- argentinian 4y ago
  The dictatorship is 'some businessmen' to you? That's an strange interpretation. And Macri's business become big thanks to its links to government (you can check the story of 'grupo macri' in wikipedia).
  - the_af 4y ago
    > The dictatorship is 'some businessmen' to you? Yes. The actual men in green uniforms were just the visible face of the dictatorship. There were actual businessmen behind their economic policies. Not for nothing the dictatorship is called the civic-military dictatorship, as you well know if you are from Argentina. > And Macri's business become big thanks to its links to government I'm well aware of Macri's corruption and its links to the government. It's ironic, really -- those who benefited the most from government ties are so quick to decry "government corruption". Such is the history of corruption, too: one foot in the government, one foot outside of it. Both parts are important. I think, historically, the government is the weaker part in Argentina, at the beck and call of those actually calling the shots.

wbsss4412 4y ago

How can you verify the actual size of the black market dollar?

the_af 4y ago
You can infer it. The most important thing is that major operations are not done in this market, obviously. Also, bizarrely enough the location of all "cuevas" (which is what we call the physical places where the illegal market operates) are well known by the authorities and could be shut down if they so wished. So there is definitely that in favor of the "the government is corrupt" argument.
- wbsss4412 4y ago
  Crypto advocates on this forum frequently list Argentina as a specific use case ( ie getting around foreign currency rules/restrictions ), that would imply that the market doesn’t just happen in “Cuevas”
  - the_af 4y ago
    I admit I'm not too familiar with the (illegal) crypto thing. I wouldn't be surprised if it was run by the same cuevas. In any case, the situation I describe is historic; the cuevas have existed for decades and nobody does anything about them. As for the size: again, major operations -- the kinds that actually "move the needle" -- are done in the legal market. I seriously doubt crypto has any impact in Argentina.
    - wbsss4412 4y ago
      Realistically I think the biggest impact is that people are hoarding dollars in offshore accounts rather than converting their currency.
  - valcron1000 4y ago
    Exactly this. Thanks to cryptocurrencies we can avoid a lot of this madness