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And, yes, I DO take it personally: One reason why it's nice to live in Argentina (at least for now)
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Friday, March 14, 2008

One reason why it's nice to live in Argentina (at least for now)

i've been curious why i am getting more peso for my dollar now than i was last year... i'm not complaining, mind you, but, as i've watched the dollar's dizzying fall, i've begun to wonder if something bad is about to happen...

i read today that argentina claims it's keeping the peso artificially weak in order to keep its exports competitive, something i had thought was going on but hadn't been quite sure of since i don't follow much of the local news... browsing nouriel roubini's rge newsletter this morning, i got an eyeful...

here's how a basket of south american currencies, plus the euro as a point of comparison, stack up exchange rate-wise vis a vis the dollar over the past two years... that last graph will undoubtedly smack you right in the face as it definitely did to me...

U.S. Dollar vs. Brazilian Real
(approx. 20% appreciation)

U.S. Dollar vs. Chilean Peso
(approx. 18% appreciation)

U.S. Dollar vs. Colombian Peso
(approx 10% in two years,
but 23% from that peak)

U.S. Dollar vs. Peruvian Neuvo Sol
(approx 16% appreciation)

U.S. Dollar vs. the Euro
(approx 21% appreciation)

U.S. Dollar vs. Argentina Peso
(approx. 2%

in short, the current rate of exchange i enjoy - $USD1 = $3.15AR - would be $USD1 = $2.80 - had argentina allowed the peso to appreciate against the dollar...

mark turner writing in rge...

Argentina is now officially playing with fire. It doesn't take Einstein to work out that the Peso is lagging behind all other regional currencies (check those charts again), and by going to the open foreign exchange market with a fixed amount of Pesos to sell they are making a huge tactical mistake. The well-founded word on the street a couple of weeks ago was that economy minister Lousteau was very close to resigning. When the forex market has finished with him and his half-baked plan, he might just get fired first.

if and when that devaluation comes - and you can bet it will, sooner or later - a lot of people here, myself included, are going to get nailed, which will be just one more chapter in this boom-bust-boom-bust country that has been going on for over a hundred years...

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