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I don't see how this won't kill local investment. It might be great for multinationals though, unless it also kills local consumption.

by orwin 2y ago

CraigRo 2y ago
The costs associated with high and unstable inflation dwarf everything else. Get that down and the economy will take off as investment gets funneled into productive endeavors
- orwin 2y ago
  I'm not sure high inflation (and by high i mean from 10 to 40% yoy) is _that_ bad if your economy isn't mondialized and you produce most of your own food and mechanized parts, as long as local/national investment follows. As it stand, Argentina inflation is way higher than just "high", and now also unpredictable since Milei took office, so i agree with with in large part, but i think this very method can and will cost Argentina its sovereignty over large part of its economy and real estate. Which isn't a bad thing if you are a foreign investor fund willing to make a risky bet (or investing in such a fund), but it might be a hard pill to swallow for Argentinians, and that could brew a lot of resentment.
gus_massa 2y ago
For years the official peso/dollar ratio has been smaller than the unofficial one. So exporters get like a 30% cut, and exporters of soy get an additional 30% cut. The government sells dollars at the cheap price only to importers, but they have to fill a lot of paperwork and have a lot of restrictions (to avoid too many imports, and to avoid frauds of fake imports). The government used to sell the cheap dollar to people, but only a small amount per month. Since a year, that changed and it has an ad hoc tax, so it's not longer cheap. (A lot of the rules change each month, so some info is simplified and/or outdated. They changed a lot during the last year of the previos president and also during the 6 month of the current president.) If you have some time and popcorn, here is a list of possible values of the dollar https://www.ambito.com/contenidos/dolar.html/1000 https://www.ambito.com/contenidos/dolar.html/1000 depending of how you want to buy/sell it. Anyway, during last year we had deficit so we were burning the reserves. Now the deficit was stopped and the "problem" is that the government has too many dollars and has to sell them. (And the main problem is how to cut the deficit and inflation without killing local consumption.)
- orwin 2y ago
  Oh ok,the government has the money, and do not want to invest it in infrastructure i suppose? Honestly it feels like a coinflip for the local consumption, it will depends on the strength of the middle class.

I don't see how this won't kill local investment. It might be great for multinationals though, unless it also kills local consumption.

by orwin 2y ago

I don't see how this won't kill local investment. It might be great for multinationals though, unless it also kills local consumption.

CraigRo 2y ago

The costs associated with high and unstable inflation dwarf everything else. Get that down and the economy will take off as investment gets funneled into productive endeavors

orwin 2y ago
I'm not sure high inflation (and by high i mean from 10 to 40% yoy) is _that_ bad if your economy isn't mondialized and you produce most of your own food and mechanized parts, as long as local/national investment follows. As it stand, Argentina inflation is way higher than just "high", and now also unpredictable since Milei took office, so i agree with with in large part, but i think this very method can and will cost Argentina its sovereignty over large part of its economy and real estate. Which isn't a bad thing if you are a foreign investor fund willing to make a risky bet (or investing in such a fund), but it might be a hard pill to swallow for Argentinians, and that could brew a lot of resentment.

gus_massa 2y ago

For years the official peso/dollar ratio has been smaller than the unofficial one. So exporters get like a 30% cut, and exporters of soy get an additional 30% cut. The government sells dollars at the cheap price only to importers, but they have to fill a lot of paperwork and have a lot of restrictions (to avoid too many imports, and to avoid frauds of fake imports). The government used to sell the cheap dollar to people, but only a small amount per month. Since a year, that changed and it has an ad hoc tax, so it's not longer cheap. (A lot of the rules change each month, so some info is simplified and/or outdated. They changed a lot during the last year of the previos president and also during the 6 month of the current president.) If you have some time and popcorn, here is a list of possible values of the dollar https://www.ambito.com/contenidos/dolar.html/1000 https://www.ambito.com/contenidos/dolar.html/1000 depending of how you want to buy/sell it. Anyway, during last year we had deficit so we were burning the reserves. Now the deficit was stopped and the "problem" is that the government has too many dollars and has to sell them. (And the main problem is how to cut the deficit and inflation without killing local consumption.)

orwin 2y ago
Oh ok,the government has the money, and do not want to invest it in infrastructure i suppose? Honestly it feels like a coinflip for the local consumption, it will depends on the strength of the middle class.