American Airlines expresses its doubts about Argentina

A vote of no confidence in the election, or a reflection of the new AA management team?

Happy wandering

Fred

There are certainly some questions about what will happen with the currency in the wake of the elections. I can see where businesses would be wary.

Neither. It's because there is going to a devaluation. The central bank has limited the amount of dollars that can currently be repatriated daily and there is a several weeks delay in application for those dollars and (the limited) approval.

AA already had a 90 day window in place between purchase (in pesos), and flight time. Foreign airlines have already removed (cheaper) fare buckets from flights ex Argentina.

Just a case of prevention is better than cure.

The election result is being welcomed by foreign business but it's going take time for changes to take place.

Air Canada is now also not selling tickets in pesos.

I cant comment on the AA management issues, but as was posted above, this has nothing to do with the new government that will be taking office on December 10th.

The new Economic measures will come into force very quickly, many of these on December 11th, so these no ticket sale issues are going to be very very short lived.

Nothing to worry about, there are better times for Argentina that are just around the corner.

With the new guy in charge, can we expect the official rate to be closer to the blue rate, making Argentina no longer a bargain?

Well, it does have to do with the new government. The airlines expect Macri will quickly devalue the peso, so they don't want to end up holding a bunch of pesos that within two-three weeks will likely be worth far fewer dollars.

I imagine that the timing of this decision has something to do with how long it takes them to convert their pesos into USD.

I expect that the airlines will begin selling peso-denominated tickets again shortly after the impending devaluation.

One question, though - Argentinean media is saying that Macri will end the cepo on Day 1, but when looking at the fine print I'm seeing some suggestion that the exchange controls will end for physical persons but might be kept in place for a while on large corporate transactions. Does anyone local have any sense as to what the plan is?

OK.... so Im kinda' of confused.

When the Peso devalues, then the new rate will be higher than the current official rate of 9.XX that we have now. Could you please be so kind as to explain how that would make nominal prices more expensive than what they are now......?????

Second question(s)..... what is your definition of a bargain...? At what level of a synthetic exchange rate do you find Argentina to be a bargain, a good deal, just a normal deal, or expensive...?

I am all ears !!!!!! (actually all eyes)

No. This has nothing to do with the new government, it has all to do with the OUTGOING government which has created all this mess.

Airlines were until 10 days ago able to hedge their Peso positions using the forward/futures markets. That was 100% legal and available until 10 days ago the Central Bank started having legal issues with the opposition legislators accusing them of fraud/insider trading, etc.

There is a lot of detail here that I don't have time to write about here, and its all quite complicated and 200% NOT travel related.

Suffice it to say that things will quickly get back to normal a few weeks after the new government is in office.

My train of thought: for example, a steak dinner is about 300 pesos. At the official rate (9:1) that is about $33.30. At the blue rate (14:1) it is about $21.40. So you go out and get some blue pesos and eat the steak for $21.40 instead of $33.30.
When the government devalues the peso to 14:1, restaurants may increase their prices immediately to reflect the devaluation. Now, the steak dinner is priced at 466.67 peso. Since both the official and blue rate are now 14:1, you pay $33.30 regardless, not $21.40 anymore.
You lose.

Your arithmetic is based on a couple of very concrete assumptions. Is this how the actual economy works...? Do all prices adjust to devaluation in the same way and at the same speed...?

May I ask how are you so certain that those assumptions are going to actually happen...? And while you are at it, please let me know where you get your Crystal Ball from as I could use one just about right now.

One other thing.... so you say "you lose".... so, who wins..? Is the owner of the restaurant selling you a Steak Dinner for $33 the winner..?

Do you want to go on a vacation to save money or have a good time... or to win and have someone else lose... sorry, but Im still very confused....

How much does a steak dinner at your place of abode cost you..? how would you compare it to the steak dinner you get for $33 in EZE...?

Do you do absolute comparisons only or is the concept of relative value also something to consider....?

No idea if it really will happen, you tell me.
What do you think will happen to the price of things?

I'm not an economist, nor do I play one on TV, but my observations (using my Empanada Index) is that most prices over the past several years are adjusted for local real inflation (not the government statistics) with the Dolar Blue as the baseline. My empanadas and taxi fares on average have remained relatively constant in US$ terms, subject to occasional ups and downs.

So as it affects tourists, I don't think there will be any immediate shockers. Of course, there could be a few items that become prohibitively expensive to import (if it still could be imported) at 15 to 1 instead of 9.5 to 1, so there will likely be some anomalies in the empanada index.

I've gone off empanadas so I'm not sure what they're currently trading at although I suspect like everything else they have risen more or less in line with real inflation not the Mickey Mouse figures the Kirchner government spouted.

I think our budget conscious travellers are worrying too much. Argentina will still be a great value destination for them. If you're concerned over losing a few dollars value then I would say cancel your trip and stay at home.