Category Archives: Argentina

Charts Of The Day: The Bitcoin-Argentina Connection

On increasing chatter I’ve been hearing about bitcoin, pending devaluation in Argentina and the possible use of bitcoin to circumvent capital controls in Argentina, I had to look at the data.

Bitcoin, for those who aren’t aware, is a virtual currency that exists solely online (I have one previous discussion of it here). I’m not going to put up any links on its origins here because you can honestly just google it and find more than enough info, but the Wikipedia page gives a decent unbiased explanation.

And the operative word in that previous sentence is “unbiased”. Because there’s a rising political element to bitcoin that I really don’t want to get into, but to sum it up, there is a palpable libertarian bent to its propagation if you can sift through all the hype and speculation, good and bad, about its use.

Personally, I think it’s an interesting experiment and am wholly agnostic about its success or legitimacy, but love seeing regulators squirm at the implications of it. To borrow from former US Defense Secretary Donald Rumsfeld, the “unknown unknowns” here are nothing less than staggering.

Actually, here is an interesting profile of bitcoin’s user base for those of you already familiar with it.

And for those of you ready for the advanced class, this is a handy diagram:

2013.03.27.How a bitcoin transaction works

Anyway, on to the data.

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Che Misterio On Argentina’s Summer Of Discontent

2012.10.18.Che MisterioLadies and Gentlemen, Che Misterio:

Argentina Lumbers On

By Che Misterio

Evidence mounts that Argentines will do whatever possible to leave the country and earn in hard-currency – even head the Catholic Church, if necessary.

As is customary when a financial crisis looms in this country, the government ups the rhetoric regarding the Falklands. The day before Bergoglio was elected Pope, a referendum on the Falklands could hardly have been clearer: of 1,518 votes cast, 1,513 voted in favor of remaining British, 2 were unable to successfully fill out what could not have been a particularly complex voting slip, and 3 voted in favor of becoming Argentine. Who were those three? I’d love to meet them. I barely follow British politics and the entire EU seems to be in a mess currently, but really – would anyone actually choose to be governed by the Kirchner government if they had a choice?

Argentina’s problems would apparently vanish if only they had those scraps of land some 500km off the coast, despite most of Patagonia remaining a vast unexploited expanse of nothingness. Sure, the islands are financially self-sufficient and they boast an enviably high GDP per capita which exceeds even that of Norway, with full-employment. But would this continue under Argentine management? The rest of the country’s economic performance does is not reassuring.

If a referendum were to be conducted today in Argentina asking voters to choose between being governed by the current Kirchner government or the British, I wonder if it would be quite as overwhelming as the 99.8% seen on the Islands?

Meanwhile, the US dollar hit a new landmark – 8 to 1 on the black market. In fact, I am not sure it can really be called the black market, as barely anyone is using the other market, which still doggedly insists the rate is a smidge more than 5 to 1. Admittedly almost no one is allowed to buy dollars at this rate, and no one remotely astute is selling at this rate, so there’s little harm fabricating the rate for a non-existent market.

The state petrol supplier, YPF, seems to prefer cash, as the debit and credit card machines seem perpetually “out of order”. Even the airlines now accept cash. Flights are actually quite cheap for those with dollars able to pay in pesos via a quick visit to the money-changer. A recent article suggests US$1 million a day is fleeing across the border to Uruguay, and there are no more safety deposit boxes left in Colonia, just across the river from Buenos Aires.

Rumors of an imminent devaluation appear unfounded. Kirchner’s new BFF, Deputy Economy Minister Axel Kicillof, is said to be flirting with the idea of multiple exchange rates, another tried, tested and doomed strategy to manage (or manipulate) a currency. Inflation continues its relentless erosion of value for all local currency assets, with the exception of four supermarkets who have been enjoying price controls, a privilege which will end in April. Watch for a surge in purchases on April 30th and a spike in prices on May 1st.

Supermarket trolley-arbitrage: only in Argentina.

[Ed. note: You’ll notice a new tag, entitled, “Guest Writing.” Here is where you’ll find all guest articles.]

China Latin America Trade: Who’s Dependent On Whom?

Yes, I am obsessed with charts. And if you’re still reading this blog with any regularity, you are too. Especially if they’re about China Latin America trade.

I finally had a chance to dig through a BBVA report from last month entitled, “How dependent is Latin America’s Economy on China?” Following are the essential takeaways.

  • Commodities have always taken a significant share of Latin American exports; the level of commodity exports concentration had been declining until the start of this century, which coincides with the further involvement of China in global markets.
  • The shift of China’s economic model makes it the biggest contributor to world commodity demand and the top importer of Latin America’s natural resources.
  • There is a positive China effect on commodity exports concentration; the dependency on Chinese demand for sample commodities has indeed increased during the last decade.
  • However, Latin American countries’ economic growth is far less dependent on China than the commodity exports figures might imply.

Now with those overview bullets out of the way, the first chart that strikes me is shown a few different ways but all with the same conclusion. This is one of the versions, demonstrating the proportion of each country’s exports that are commodities:

2013.03.12.Latam-China commodity exports percent share total

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Street Markets 101: Che Misterio Navigates Argentina’s Black Market for Dollars

2012.10.18.Che MisterioI am humbled, honored, grateful and excited to once again present Che Misterio in Argentina, who continues endangering his life for the purpose of shining a light on one of the blindest of economic blind spots in the world today: Argentina’s black market in foreign exchange. Che previously enlightened us in this space on the topics of Big Mac inflation and street level economics. The following was first published on Seeking Alpha under my name in a version suited to that publication’s editorial format, entitled, “How to Navigate Argentina’s Black Market in Foreign Exchange”. Below is the original as submitted by Che Misterio.

Ladies and gentlemen, Che Misterio:

Where Next for Argentina?

By Che Misterio

It is no secret that Argentina is now a two-tiered society. There are those with hard currency for whom the standard of living is quite cheap, and who are therefore immune to chronic inflation as their dollars and euros appreciate even quicker than prices. And then there are those without hard currency, and they live a precarious existence, to say the least: they cannot save their pesos, and even if they could it would be pointless as inflation rages on despite government insistence to the contrary; flagging confidence in the national currency and ever tighter regulations on foreign exchange means the only way to acquire a meaningful amount of hard currency is to pay an expensive premium on the black market.

I am grateful to belong in the first tier. I exchanged some euros recently on the black market, despite the terms being rather nebulous. For those unfamiliar with the street level workings of Argentina’s informal economy, this does not involve some suspicious character in dark sunglasses manning a backstreet stall flanked by security guards with black ear pieces protecting the stash. This was in an otherwise regulated bureau de change on a busy street, staffed by a man of average height, weight, complexion—what those in show business refer to as “the everyman look.”

The opening conversation went something like this:

“Hi, I’d like to change euros please”
“Where are you from?”
“We don’t change euros.”
“But Roberto changes euros, no?”
“Please wait here.”

“Roberto” was the code word a friend of mine had given me for signaling to this bureau de change that I wanted to transact at the black market rate. The man turned his back to me and knocked on the tinted glass of the door behind him. The door made a slight clicking sound as the magnetic lock loosened and the door opened. The man disappeared through the doorway and the door closed and locked, leaving me alone to wait. Two minutes later, the door re-opened, and he beckoned me to enter.

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Photos of the Day: Cristina Fernández de Kirchner, Weekend Warrior

Surely there’s more to this than meets the eye?

2013.01.30.Kirchner Weekend Warrior 01

Apparently these photos were taken by the official Casa Rosada photographer during a recent trip to Vietnam in which President Cristina Kirchner took a tour of Viet Cong tunnels and foxholes used during the war against the United States.

A picture’s worth a thousand words, right? Well, I can go in about 20 different directions with this…hang on…it’s coming to me…okay I think I’ve got it…ready…set…go:

“No, no, I’m talking about those up there, with the pump action…yes, leave them noisy. That way it scares any pain-in-the-ass innocent bystanders away…”

2013.01.30.Kirchner Weekend Warrior 02

“If I had a peso for every bounced check I’ve signed like this, I’d be about as rich as I am right now…inflation-adjusted, of course…whatever, I’m just happy to not have the most worthless currency in the room for once…”

 2013.01.30.Kirchner Weekend Warrior 03

“Hey guys…so is this the hole you jump down when foreign creditors come to collect their debt repayments?”

2013.01.30.Kirchner Weekend Warrior 04

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Miami restaurant accepts Argentine pesos as payment

Oh my. This is brilliant:

Rapid Growth Markets: Behold THE FUTURE

I’ve just spent way too much time playing with Ernst & Young’s interactive spider graph thingy that allows you to compare their 25 “rapid-growth” markets across a range of macroeconomic indicators. According to E&Y, these 25 countries possess the most promising “long-term potential to generate strong business opportunities.”

So since a picture is worth a thousand words, here’s how all 25 of these economies will change from 2011 to 2016 from the meta-macro view, compared against each other:

Okay! Is everybody ready to go out and make some money?
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Cristina Fernández Kirchner, Money Manager Extraordinaire

Argentina’s La Nación had a rather thorough vetting of the Kirchner family assets profile yesterday. Pictures always speak loudest so let’s start with a visual. Here’s a nice chart showing the growth of CFK’s net worth (translated and interpolated by Inca Kola):

Kirchner’s current net worth, estimated here at 89 million pesos, is either US$18.7 million at the official rate or US$14 million at the black market rate. While the Kirchner government has a vested interest in keeping the exchange rate artificially strong to project the illusion of sovereign fitness, this also gives Kirchner herself the appearance of having a higher net worth in USD terms than is realistic.

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Roosevelt Investments’ Tim Ramsey likes Nigeria, Pakistan, Kazakhstan and Argentina (sort of)

Worth a few minutes for the commentary. Note his explanation in particular of Argentina–it’s about relativity:

Source link is here.

Che Misterio asks: Could Argentina be manipulating Big Mac prices? A preliminary investigation.

I am pleased to once again present Che Misterio, who previously enlightened us with the realities of Argentina’s economy at the street level. Today, he takes on the very provocative question of whether that time-tested bulwark of American soft power, the Big Mac, might be the latest commodity to fall victim to Argentine price-fixing. Ladies and gentlemen, a preliminary investigation:

Big Mac Fraud

by Che Misterio

Could the Kirchner Administration be obsessive enough to fix the price of a Big Mac?

In Argentina everything is possible.

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Street Markets 101: Ground Zero in Argentina

I’m very excited to introduce the second installment of Street Markets 101 today (go here for the first installment), submitted by a guest writer in Argentina who for professional and security reasons is unable to use a real name. I modified this to suit a different editorial format for publishing last week on Seeking Alpha under my name with the headline, “A Street Level View Of Argentina’s Economy, The Peso And ARGT” (see here for the Seeking Alpha version) , but I could not have done it without the help of the source. Today, I present the original unabridged version. Without further adieu:

Ground Zero in Argentina

By Che Misterio

The nationalization of YPF, the falsification of economic data, inflation, mounting street protests and the volatile commodity prices…. these are all fascinating points for the international community to examine in any assessment of the unfolding crisis in Argentina. What has failed to reach the general audience is the impact of the CFK government upon the layman, particularly beyond the confines of Buenos Aires.

I am an economist and live in the “provinces”. I am not Argentine, but am intrigued by the ability of the Argentines to adapt to economic mis-management effectively and creatively. I assume this is simply due to a century of practice. Consider the following impacts on the layman:
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Latin America Political Risk: perception vs. reality

The Gold Report has an exclusive interview with Carlos Andres chief analyst and managing editor of the Frontier Research Report and the Global Resource Investor that goes into rather gritty detail on risk assessment in the mining sector. If this is your thing, I would recommend reading the entire interview, but following are the bits that grabbed me the most.

On Peru:

Carlos Andres: Now is one of those times where perceived risk is moving close to actual risk. It’s narrowed, even in some of my favorite jurisdictions, like Peru, which is a mining powerhouse and is No. 2 in the world in copper, No. 2 in silver and No. 6 in gold. Nevertheless, it’s experiencing some problems with local unrest to the point where it’s receiving international attention. It’s brought a cloud over Newmont Mining Corp.’s Minas Conga project, which has the green light from government but is moving very slowly in the face of local opposition.
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Kirchner-Argentina-Repsol YPF: the hating continues

I’m about to do two things that are not at all my custom: 1. beat a dead horse; 2. re-post someone else’s work in its entirety.

I’m doing this today because first, people still haven’t learned the lesson, but more important is that someone else (namely Win Thin, Global Head Of Emerging Markets Strategy at Brown Brothers Harriman) has spelled this out more eloquently than I have previously or ever could. This correspondence was sent to me by a third party and while I have full confidence that it remains unaltered, in the event any BBH lawyer is reading this let me state in no uncertain terms: the words you are about to read are originally (as far as I know) from Brown Brothers Harriman. If a link had accompanied this correspondence, I would post it here, but since it didn’t, I’m posting the full text of the report.

OK here we go:
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We knew Argentina would nationalize Repsol YPF and screw Spain, didn’t we?

I hate to say “I told you so”, but…I told you so. Twice, actually. Sorry, make that three times.

And I wasn’t the only one either. BMI told you so too. So did Euromoney. So did an unnamed arbitration lawyer to beyondbrics:

I think foreign investors should be very cautious in their dealings with the provinces at this time and expect that every underperforming asset can and will be taken away from them in the short term.
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How Argentina and Venezuela Can Rain on Mercosur’s Parade

I’m generally not of the disposition to say “I told you so” but the latest podcast from Business Monitor International is a pretty good follow-up to what I’ve already written previously about Argentina and already known for a long time about Venezuela: by pursuing Neverland-type economic policies, both of these countries are putting the whole neighborhood at risk, particularly now that economic growth is slowing.

Since Venezuela is the more urgent of the two, let’s hit those bullets first:
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Qualifying the Risk of Investing in Argentina’s Economy

I’ve been receiving some correspondence lately from what are clearly supporters of Cristina Fernandez Kirchner in response to my Argentina comment a few weeks ago. While I wouldn’t quite call it “hate” mail, the thrust of it is definitely somewhere in that direction. So I’d like to take this opportunity to clarify a few things.
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Argentina’s Unstoppable Allure

Is Argentina really any better off under Cristina Fernández Kirchner than her late husband or any of his recent predecessors? What am I missing that is so attractive about Argentina? Italians who speak Spanish but think they’re British living in Paris—I get it, it’s so cosmopolitan, it’s so cultured, it’s so…schizophrenic.

Albert Einstein famously defined insanity thusly: “Doing the same thing over and over and expecting different results.” And for better or for worse, this is what ran through my mind when I read the latest umpteenth face-off in the way-too-many-episode saga known as the Kirchner government v. Repsol YPF of Spain.
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