4/4/12

In the early part of the 20th century, Argentina was among the top ten richest countries in the world, maintaining this position into the 50's.

Between 1890 and the 1930's, Buenos Aires was totally overhauled, changed from a pretty Spanish colonial town to what it is today, a huge city with sprawling boulevards, French and Italian architecture, hundreds of parks and plazas and tree lined streets.

During this time, the very rich traveled to Europe, especially to Paris where they painted the town red with their parties, their music and their beautiful women. It was the French, seeing how lavishly the argentines spent money, who coined the phrase "riche comme un argentin" or "as rich as an argentine".

I wrote before about how Argentines invest in "brick", buying property after property in cash, as a means to putting their money away for a rainy day, in a US$ denominated asset, real estate.

Well, during 2011, Argentines "saved" close to 18.5 billion dollars, in one form or another. Some funds are literally saved "under the mattresses" , although it is more common to put your greenbacks away in a bank's safe deposit box, or illegally ship them out to hard currency denominated accounts overseas. Eighteen and a half billion dollars, a record in the last decade, at a pace of over 1.5 billion a month!

This outflow just about doubled the amount of cash held underground by argentines, which now totals close to 161 billion dollars, exceeding the total argentine external debt by about 20 billion or so!

Argentines were apparently not daunted by their government's desperate measures to control or eliminate capital flight, paying a hefty premium of up to twenty percent (the difference between the official rate and the "blue" rate) to transfer their funds to safer terrain.

As rich as an argentine indeed.

Comments (23)

4/4/12

do you think there will be hyperinflation here? if so will the public's reaction be anywhere near as bad as in 2001 (ie riots)?

what do you think the exchange rate peso:dollar will be in 6 months? 1 year?

will the exchange rate w/ the dollar ever truly match up with the rate of inflation?

WSO's COO (Chief Operating Orangutan) | My story | My Linkedin

4/4/12

my guess....

6 months - 6:1

1 year: 8.2 - 1

4/4/12

depends how you define hyperinflation. some define it as 50% a MONTH, some as cumulative 100% over three years, some define it as oh my! In the 80's here, stores and supermarkets did not put price tags on things! If you were in the supermarket with a cart full of goods, you would hear an announcement saying that prices were immediately increased by ten percent, as an example.
I somehow don't see that happening again.
The real exchange rate is now over 5.20. There is no transactions being done in the official rate anymore, so you have to look at the blue rate. Six months? I think around 6. One year? 6.50/75
Will the exchange rate keep up with inflation? no, silly, this is argentina :)

WSO contributing writer. Contact: diamondlil2012 at gmail.com
Buy dollars and wear diamonds

4/4/12
Diamond Lil:

depends how you define hyperinflation. some define it as 50% a MONTH, some as cumulative 100% over three years, some define it as oh my! In the 80's here, stores and supermarkets did not put price tags on things! If you were in the supermarket with a cart full of goods, you would hear an announcement saying that prices were immediately increased by ten percent, as an example.
I somehow don't see that happening again.)

The generally accepted standard is 100% cumulative over three years.

My name is Nicky, but you can call me Dre.

4/4/12

I predict impeachment for De Kirchner before she is up for reelection in three years. The lady is a helplessly incompetent socialist who makes Barney Frank look like Ronald Reagan. Now she is trying to repress freedom of speech and shut down independent inflation calculations.

I own an Argentinian farming stock and I have watched the whole situation play out with an amused grin on my face. Famous last words, but I don't think she is going to try and nationalize agriculture. Too many small and middle-class farmers, especially with the protests just a few years ago.

That said, some level of Peronism made Argentina a better country. Don't forget that 98% of Argentina was dirt poor until Peron showed up. The key to having a healthy middle-class is finding the right balance between not having an activist economic redistribution policy and not being a laissez-faire capitalist country. The US found that from the late '50s through the '90s.

In the 80's here, stores and supermarkets did not put price tags on things! If you were in the supermarket with a cart full of goods, you would hear an announcement saying that prices were immediately increased by ten percent, as an example.

I think, by definition, you have hit hyperinflation when the government is threatening to JAIL independent statisticians. This looks like the makings of a classical too-much-socialism collapse ala Ayn Rand.

DeKirchner's policies of printing too much money for too much social spending and too many union wage hikes are going to collapse. And I'm not sure her policies of too much mercantilism on commodity exports are helping.

Large wealth transfers from the rich to the poor never end well. That said, tilting the economic playing field against the rich can result in moderate but sustainable wealth transfers from the rich to the midddle-class.

4/4/12

That said, some level of Peronism made Argentina a better country.

Argentina was a very wealthy country until Peron and company started robbing the country blind, in the late 40's. That began a wonderful tradition of "run for office, become rich" which carries on to this day. The Kirchners have made the poor poorer and the rich, especially themselves, richer. Their gang of hoodlums are running the country, or should I say ruining the country...

WSO contributing writer. Contact: diamondlil2012 at gmail.com
Buy dollars and wear diamonds

4/4/12

"I wrote before about how Argentines invest in "brick", buying property after property in cash, as a means to putting their money away for a rainy day, in a US$ denominated asset, real estate."

The issue is, as an international investor, how do you repatriate your capital gains on the real estates, given the country's stringent capital control? I guess you could try the Casas de Cambios, but they charge you hefty amount, I think around 8% of transaction fees, even then you will likely face issues with large amounts.

Too late for second-guessing Too late to go back to sleep.

4/4/12

The issue is, as an international investor, how do you repatriate your capital gains on the real estates, given the country's stringent capital control? I guess you could try the Casas de Cambios, but they charge you hefty amount, I think around 8% of transaction fees, even then you will likely face issues with large amounts.[/quote]

18 billion a year is certainly NOT shipped out via casas de cambio. there is a way. there has always been a way in Argentina, capital controls or not. Private banking by foreign banks seeking argentine clients is big business here, it would not be if argentines did not seek out foreign bank accts and were unable to repatriate.

I can certainly give you more information, but I prefer not in a public forum!

WSO contributing writer. Contact: diamondlil2012 at gmail.com
Buy dollars and wear diamonds

4/4/12
Diamond Lil:

The issue is, as an international investor, how do you repatriate your capital gains on the real estates, given the country's stringent capital control? I guess you could try the Casas de Cambios, but they charge you hefty amount, I think around 8% of transaction fees, even then you will likely face issues with large amounts.

18 billion a year is certainly NOT shipped out via casas de cambio. there is a way. there has always been a way in Argentina, capital controls or not. Private banking by foreign banks seeking argentine clients is big business here, it would not be if argentines did not seek out foreign bank accts and were unable to repatriate.

I can certainly give you more information, but I prefer not in a public forum![/quote]

A new law came out that foreign bankers are portfolio managers are not allowed to solicit in Argentina anymore unless they have the appropriate licensing.

4/4/12

A new law came out that foreign bankers are portfolio managers are not allowed to solicit in Argentina anymore unless they have the appropriate licensing.[/quote]''

we were never allowed to openly solicit...

WSO contributing writer. Contact: diamondlil2012 at gmail.com
Buy dollars and wear diamonds

4/5/12
Diamond Lil:

The issue is, as an international investor, how do you repatriate your capital gains on the real estates, given the country's stringent capital control? I guess you could try the Casas de Cambios, but they charge you hefty amount, I think around 8% of transaction fees, even then you will likely face issues with large amounts.

18 billion a year is certainly NOT shipped out via casas de cambio. there is a way. there has always been a way in Argentina, capital controls or not. Private banking by foreign banks seeking argentine clients is big business here, it would not be if argentines did not seek out foreign bank accts and were unable to repatriate.

I can certainly give you more information, but I prefer not in a public forum![/quote]

I just sent you a PM about this. Let me know if you received it. Thanks!

Too late for second-guessing Too late to go back to sleep.

4/5/12
brandon st randy:
Diamond Lil:

The issue is, as an international investor, how do you repatriate your capital gains on the real estates, given the country's stringent capital control? I guess you could try the Casas de Cambios, but they charge you hefty amount, I think around 8% of transaction fees, even then you will likely face issues with large amounts.

18 billion a year is certainly NOT shipped out via casas de cambio. there is a way. there has always been a way in Argentina, capital controls or not. Private banking by foreign banks seeking argentine clients is big business here, it would not be if argentines did not seek out foreign bank accts and were unable to repatriate.

I can certainly give you more information, but I prefer not in a public forum!

I just sent you a PM about this. Let me know if you received it. Thanks![/quote]
did not receive!

WSO contributing writer. Contact: diamondlil2012 at gmail.com
Buy dollars and wear diamonds

4/4/12

I'm going to add a useless comment that deserves monkey shit, but I never thought I'd be sexually attracted to a dictator--and then I see Kirchner, who is pretty hot and has a sexy firebrand personality. Maybe she just needs to get laid or something.

4/4/12
Virginia Tech 4ever:

I'm going to add a useless comment that deserves monkey shit, but I never thought I'd be sexually attracted to a dictator--and then I see Kirchner, who is pretty hot and has a sexy firebrand personality. Maybe she just needs to get laid or something.

hahaha vt4ever take a closer look at her..... ms for sure

WSO's COO (Chief Operating Orangutan) | My story | My Linkedin

4/4/12

Andy, you wouldn't holler at De Kirchner?

4/4/12
M Friedman:

Andy, you wouldn't holler at De Kirchner?

as the argentines say, "ni en pedo" - not even drunk

WSO's COO (Chief Operating Orangutan) | My story | My Linkedin

4/4/12

This is a good opportunity to remind folks that by 20th century standards, Obama is still largely a free-market capitalist. DeKirchner is what a true socialist looks like; even then, Argentina is nowhere near as bad as a 1980s-style communist state.

Republicans need to be careful about throwing the socialist card too quickly or the charge "socialist" loses its meaning.

4/4/12

BTW, her name is not DeKirchner. her name is cristina fernandez de kirchner. the "de" refers to whose wife she is. so if you are a smith and you marry a foley, then you would be cristina smith de foley. but you would never be referred to as a "De Foley"

just a bit of an education

WSO contributing writer. Contact: diamondlil2012 at gmail.com
Buy dollars and wear diamonds

4/4/12

yeah but now they are actually charging employees and employers. We re not allowed to go to Argentina even tough we have clients there (since November)

4/4/12
Unforseen:

yeah but now they are actually charging employees and employers. We re not allowed to go to Argentina even tough we have clients there (since November)

huh?

WSO contributing writer. Contact: diamondlil2012 at gmail.com
Buy dollars and wear diamonds

4/4/12

so if a Merrill employee goes to visit a client in argentina, Merrill can get charged

4/4/12

Unlock These Comments - Free

Join Us or Login

Too late for second-guessing Too late to go back to sleep.

4/4/12

WSO contributing writer. Contact: diamondlil2012 at gmail.com
Buy dollars and wear diamonds

Add a Comment