Tuesday, February 5, 2013

The Dollar Blue

The currency market here in Argentina is turbulent.  For much of the past decade the Argentine Peso was worth about .20 to .25 cent US.  Inflation has been bad here during the past three years, officially the rate is 10 percent, unofficially it is above 25 percent.  The IMF has recently penalized Argentina for failure to report its economic statistics accurately.  The Presidenta howled but the market understands inflation.  So there is a black market in US dollars.  Everyone wants them. While the official rate is 4.99 pesos to one USDollar, you can sell your dollars to money changers, Cambios, for a fluctuating rate based on supply and demand.
When we got here twenty days ago the rate was 7.2 pesos to the dollar.  Yesterday it hit a new high of 8.0 to one.  The front page headlines in today's paper show this is a real problem for the government and they are trying to stop it. In a desperate measure, the government announced yesterday that they are putting price controls on all the major supermarkets to try to hold down food prices.  Right.  We will see how long that works.  Government controlled price fixing has never worked over a long term.  It can create short term dislocations, winners and losers.  But over time the market will prevail.  Thankfully. In the meantime, can you please sell me some more Pesos for 8 to 1?

1 comment:

Tanya said...

Can you bring me some pesos! ha ha At least it is no longer 10,000 australs to $1.00!!