spainflyer

and dropping like a stone, according to Ambito.com. As Siempre Viajando says, this is unsustainable. The brecha or difference between official and blue rates is nearing 100%. An official devaluation is on the way, which will only drive up (or down, depending on your viewpoint), the blue rate, as well.

In this frenetic market, I repeat my earlier question (#131, above) -- who establishes the dólar blue rate? Is it just "word on the street," arbolito to arbolito, cueva to cueva, or is it something more official? And what accounts for the differences (and they are up to 0.20 ARS) between Ambito, La Nación, and Dolarblue.net rates?

Gaucho 100K? Siempre Vi?

Gaucho100K

I agree that the official rate will have to be adjusted to something around AR$10-11 but the timing of this is hard to predict... it could be anytime between now and February, I guess they will try very hard to get through Xmas with no huge devaluation but its not going to be easy......

Gaucho100K

There is nothing official about this market.... what drives the price of the Dollar in Venezuela, or what drove the price of the DM in East Berlin.... or the price for American made Cigarettes during WWII.....? This is a "black" market, with all the peculiarities that this involves... there is very little that is transparent about markets with these characteristics. Demand and Supply is at work, but there are other factors and.... the Devil is in the details.....

Siempre Viajando

Disclaimer: I'm just a dumb engineer, not an economist.

My response differs from Gaucho's. I think the blue rate is really more "transparent" than the official rate (actually, official rates, as there are several) established by the central bank.

Why? Because the blue rate is the market rate. It represents the consensus view of the Argentine people about the value of their own currency. It is supply and demand, that simple. Of course, what drives supply and demand is not simple and in the case of Argentina today I suspect that there's a herd mentality at play; but the root cause of the stampede is the incompetence and corruption of the current government, that has been running budget deficits and paying for these by printing more pesos.

The official rate(s) is/are anything but transparent. The government is evidently trying to avoid further devaluation knowing that this will only exacerbate inflation, now running at close to 40% annually (in peso terms). But I haven't seen any clear statement from anyone in the government or the central bank regarding the guiding principles of Argentine monetary policy. If Gaucho or anyone else can point me in the direction of such guidance, please speak up!

Interesting side note: last week I travelled with my family to Argentina. I paid cash as I went, exchanging US$ for pesos at the blue rate. Prior to traveling I assumed that I could easily buy Argentine pesos in Santiago, at the blue rate or even better than the blue rate in view of the fact that the Argentine peso is nearly worthless in Chile. But not so: the pesos were available but Santiago money-changers were in fact valuing them slightly higher than the blue market rate. This may be a reflection the herd mentality prevailing in Argentina at present, which is driving the market value ever lower.

spainflyer

Thanks to both Gaucho 100K and Siempre Viajando. I do understand that it is a matter of supply and demand (Gaucho 100K), but I guess I should have asked: “Who measures that supply and demand?” The central bank (BCRA) clearly does not – and would find it impossible anyway, since the transactions are semi-clandestine and not recorded (although some newspapers print with confidence items like “Yesterday 100 million USD changed hands on the parallel market.” These figures are at best estimates, and may actually lead us back to the central bank, anxious to diminish the importance of the dólar blue.

So I agree with Siempre Viajando, the dólar blue is a more accurate measure of the value of Argentine currency (and ultimately, of the Argentine economy) than the official rate. Even the IMF accuses the Argentine monetary authorities of making up the numbers they publish on inflation, imports and exports, and a host of other indicators. They are also making up the value of the official exchange rate, and selling dollars when they must, to maintain that rate.

I did find an article that addresses how the dólar blue rate is determined, although it makes the process sound more like a college secret society than a currency exchange. Fairly elaborate system, fairly interesting stuff:

http://www.iprofesional.com/notas/13...-del-dlar-blue

Thanks to all, and buen provecho with the dead cow dinners!

Siempre Viajando

That is an interesting link, but as you say, not really that informative.

I don't understand what happens behind the front-line stuff on the "blue" market that determines the prevailing exchange rate in the street, but I don't think it's any more complicated than a broad consensus by the market participants (most of whom are presumably Argentines, the presence of many foreign tourists notwithstanding) on the value of the peso in dollar terms. Senior Argentine government officials have made public comments recently simultaneously dismissing the black market as unimportant while blaming it on anti-government conspiracies, whether driven by international players like the "vulture" funds or domestic political opponents. Neither point holds water; their real intent is to deflect attention from the root cause of the peso devaluation which is their own inability or unwillingness to implement stable fiscal and monetary policies.

Peru offers an interesting contrast. My Peruvian-born wife well remembers the days of hyperinflation (and terrorism, but that's another story) that caused her father to lose his life savings, twice. She remains to this day a supporter of ex-President Alberto Fujimori (who now languishes in jail) who freed up the economy, banished currency controls and stabilized the exchange rate. For twenty or more years the Nuevo Sol has traded freely and over the last 15 years it has appreciated against the dollar. Peruvians don't rush to buy dollars on the black market because there isn't a black market, and they know that they can trade freely when they want to, and they trust that whoever is in power tomorrow will not change that policy.

OK, so Fujimori was a corrupt autocrat; but Argentines, poor and rich alike, need to hope that their next president can do for their economy what he did for Peru's.

Eastbay1K

Trying to keep the politics out of this, the panic and/or rumor mill also tends to spike the Blue and then it softens a bit, but even one buys during a spike, to date, it still has remained a good bet.

The tourist industry probably doesn't register much in the rate demand. If anything, it would lower it by the very slightest of percentages, as it brings more US$ into the country.

SoFlyOn

I have it on the highest authority that "es un problema vivir en blanco en la Argentina".

The Argentina flag is blue and white. Coincidence? I think not!

HIDDY

Leaving the politics aside I just think it's all a big ruddy mess.

Not only can we not just walk into a bank and buy foreign currency as we want the wife's now telling me we'll have to fill two empty suitcases with bricks next time we go on a shopping trip to Europe.

Eastbay1K

???

SoFlyOn

"celestial" blue @:-)

Eastbay1K

Mejor!

Siempre Viajando

From this morning's La Nación website:

"Obsesionado por la repercusión que tiene la sostenida escalada del dólar y su impacto sobre las expectativas y la conducta de los agentes económicos, el Gobierno comenzó a trabajar en una reforma del régimen penal cambiario, con la idea de agilizar el combate contra el floreciente mercado negro de divisas."

Which is to say: "Obsessed with the effects of the continuing escalation of the dollar and its impacts on the expectations and behavior of economic players, the government has begun work to reform the currency exchange penal code, in order to accelerate the fight against the flourishing black market in currency exchange."



Good luck! Senior Argentine officials need a lesson in Economics 101.

spainflyer

Perhaps even more basic: "There is no free lunch." No matter how much you promise "free stuff" for votes, no matter how much you rail at "los imperialistas yanquis," Argentina, and no country, can get something for nothing, money without consequences.

Speaking of the law of unintended consequences, La Nación reports today that the Argentine government is now admitting that there are police guarding the cuevas:

http://www.lanacion.com.ar/1731280-r...nella-procelac

allanfan

I've a separate but related question. I'm going to BA in about 2 months. If I bring back to the States some "extra" peso, can I exchange them back to dollar at the official rate?