Actual Crisis In Argentina
Well, it seems like the country is dealing with some difficult issues right now.
Since its
Minister of Economy
, Martín Guzmán (who is an Stiglitz's disciple) resigned like 20 days ago, the US dollar has rissen from 1
USD
= $235 to 1 USD = $340 and is still growing.
Argentina has more or less 30 different prices for the dollar (yes, 30) and citizens aren't allowed to buy more than USD 200 in official banks at $280. As a result, (practically all) Argentinians who want to buy more than that amount need to buy "Dollar Blue" (an euphemistic name) in unofficial exchange houses at the price of $340.
Argentinians use it as a
store of value
because inflation is right now 5%-8% MONTHLY.
Now, the actual left-minded government is accusing farmers of not selling soybeans, which are the principal motor of their economy. They are saying that they are speculators who only want to get more revenue and pushing the country into a crisis. But they are paying farmers only $85 for each dollar that they earn.
The actual government is also saying that the actual (lack of dollars and in consequence) crisis is the result of the
capital flight
of USD 45 billon, which was the amount that the IMF lent to the previous right-handed government in 2016.
However, politicians from the previous government are arguing that they used the money to pay Argentina's debt to US hedge funds and other institutions who were creditors during the period of 2004-2015 (which was also led by the actual left government).
Some people say in Argentina that this will end in hyperinflation.
I want to know if you are aware of this situation in the country and what are your predictions for a situation like this!
Comments ( 19 )
Makes me thankful to be an American. America is facing tough times due to the idiots currently in power, but even then, I'm not worried about life or death. The majority of countries out there truly are shitholes if you're looking at government corruption. I'm sure Argentina is a beautiful country (and many on this site have said so), but the government is absolute garbage. Same with Venezuela. Same with majority of central and South America.
God bless America, and fuck the Yankees
I have never ever seen a left leaning government fail at economic policy. Ever.
> Introduce leftist policy for "social justice" (read: some populist nonsense that the most idiotic median of the population wanted you to do for some reason)
> It fails spectacularly (who would've guessed?)
> Use chaos you created for leftist policy (like blaming farmers for your mismanagement so you can expropriate their stuff)
> It fails spectacularly
> Repeat the same thing over and over again
There's a somewhat simple solution to this.
Or, as an equally effective, alternative policy measure, you could just blame soybean farmers because they're evil capitalists. That'll do.
Agree with everything you've said but Argentina is a difficult case because they're so far gone it takes more than just reform-mindedness to get things back on track. International (and local, nobody wants to hold local currency ) faith in the country is so low that the second there's any loss of confidence it just devolves into a shit storm and the country implodes again.
Take 2018: even though you had a fairly determined reformist government that had started making progress, it took just a single Fed rate rise for their yields to skyrocket and currency to collapse, effectively locking the government out from funding markets. The government became so desperate for cash it had to resort to reinstating some of the worst distortions like export taxes (yes, things are so fucked up in Argentina that they even tax exports to try keep domestic prices down). From there a default was inevitable even though they kept limping on for another year or so, and things just went back to how they were with another Peronist being elected soon after.
I'll take the time to thank you for making that clear. I'm not that informed on the situation of Argentina. The point of my comment was primarily to make fun of how populist trashcans operate. I'm not expecting Argentinian officials to derive their economic policies from WSO .
China says ni hao
you can't fail at economic policy if you bail out all debtholders and never report accurate GDP numbers
underpants gnomes are running the politbureau
I would argue that the IMF has enabled this behavior by constantly bailing out failing regimes and preventing them from rightful collapse. Nations should crash and burn by their own policy failures, and the IMF uses our taxpayer dollars to preempt that process, thereby trapping certain nations under perpetually bad regimes. That being said, the Argentinian people are also extremely culpable for continuing to elect Peronists. In fact, there are still ardent supporters of Cristina Fernández, aka "Argentine Hillary" despite her unbelievable corruption.
Falkland Islands will be invaded
This would be a god-send for the Conservatives
As an Argentinean American, it is hard to see this beautiful country suffer. Kirchner reign needs to leave asap.
And to think that Argentina used to be one of the most prosperous countries in the world.
Argentina has been dealing with an inept government and inflation for several years now. I think the IMF / World Bank / some type of international aid will have to step in again and help restructure the nation's obligations.
In the meantime, the rich people will be fine and it will be a dog fight among the masses of poor. But this is life in many other countries. When you live in America you think it's really bad, but these smaller, poor countries really have it bad.
The long term solution would be to install more capable, honest people in positions of government power, but that's basically impossible. Governments have defaulted before and nothing really happens. The IMF just soaks up the bad debt, and they don't care about losing money as long as they prevent a total collapse of a country's economic system.
The rich people will be fine? Hope you don't mean the rich Argentinians, the crisis has affected everyone, and the reaction of the government is always to blame the rich class and raise taxes for those with the most wealth.
Looking at the data, you will see that wealth has fallen in all social classes, taking many from the upper to the middle class and from the middle to the lower one.
(I am Argentinian)
As an Argentinian studying in the U.S because I knew I needed to leave in order to get a better life, sighs . Busted my ass to get a full ride over here with the hopes of eventually getting my family out, my mom calls me crying every week because they can barely stay afloat (they own their own small business). I dream of they day I can send them money or just straight out getting them out of there. It's hard to be here hearing how everyone's suffering but they worked so hard for me to have this chance that I can't be sobbing, need to make it.
It's been definitely interesting to see how Americans have reacted to inflation over here to say the least. I truly believe hyperinflation is coming or they may try to tie the peso to the U$SD to salvage what's left, but as someone who lived there for 18 years with my whole family there, I can tell you it doesn't get better.
Argentina has always had a terrible economy. BRICS wont save them.
Argentina se va a la mierda, that is why I left
Tragedy of the Commons . Fixing the Argentinian economy requires the Government to make hard choices that will lead to suffering. But, suffering is unpopular so you get populist governments enacting populist policies and it just makes the situation worse. Rinse and Repeat.
The prominent exception to this cycle in recent(ish) memory is Singapore, which, as a (benevolent) dictatorship, did what was good for the people rather than what the people wanted. Then again, that's a debate in its own right.
They can sell the World Cup when they win it
Et vel aut amet illo dicta. Rerum sapiente non facere assumenda alias laborum.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...