The Great NW where the rain falls mainly on my brain
Argentina’s Mad Dash for U.S. Dollars
The crazy Argentine government is at it again, as we all probably know by now. How such a wealthy country can end up so perpetually mismanaged is beyond me. Yet the lesson is, when your money eventually becomes trapped, 'the market' becomes a store of value.
If you find yourself driving through the suddenly packed condo canyons of Miami—lamenting not having bought during the property crash—shake a fist or two at the Argentines. So many of them ponied up 80 percent cash down payments on units (mortgage market be damned) that South Florida’s condo depression rather abruptly turned into another boom. Their thinking was defensive: Swap iffy pesos for dollars and store that value in U.S. property, out of the prying hands of the government back home.
Now, with Buenos Aires finding some rather innovative ways to crack down on the flight to dollars, that spirit of capital preservation has morphed into a panic in Argentina to get out of the peso, the world’s worst-performing currency. In the black market for dollar-denominated bonds, Argentines are spending dearly to circumvent President Cristina Fernández de Kirchner’s expanded limits on foreign exchange, and inflation that’s privately estimated at 25 percent. According to data compiled by Bloomberg, the black market exchange rate is at 8.98 pesos per dollar, after touching a record 9.14 pesos last week. Compare that with the government’s official exchange rate of 5.17 pesos per dollar, and it’s easy to see why Argentines are so desperate to get out of the local currency in South America’s second-biggest economy.
The anything-but-cash mood is also helping the store-of-value appeal of Argentina’s equities, where the benchmark Merval stock index is up 23 percent this year.
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