Argentina, economically and politically

Discussion in 'Economics' started by inggscap, Aug 7, 2007.

  1. inggscap


    Anyone have any views on Argentina and it's upcomming elections? what effect it could have on the Pesos and it's stability?

    Thanks :)
  2. i haven't really been following it but i can only see the pesos rising after the elections.
  3. inggscap


    Thanks mate. What would be the reason though? Is it a regular "cycle" that happens after an election? Example...more confidence if the elections go well so foreign capital flows in pushing up the currency?
  4. Raul641


    The Argentine economy is booming right now on oil extraction and foreign investment, made particularly attractive by an artificially low peso. They're basically printing money to inflate away the purchasing power that the economic growth is creating, to ensure that there will be a net influx of foreign capital and a strong market for exports.

    There has been a huge ongoing scandal in Argentina over the last six months or so over the official inflation figures. The financial industry (in Argentina and abroad) believes that the Kirchner government is doctoring the numbers to show artificially low inflation rates for political reasons. (The Argentine financial press openly prints headlines to this effect, a nice contrast to the US, where the press generally refuses to call government corruption when they see it.) They've gone through several economy ministers over this.

    Pesos trade around 3.10 or so to 1 USD right now - I think they're worth more like 2.25 - 2.50. Peso futures in Buenos Aires show negative implied interest rates, turning positive in October (after the elections).

    Kirchner has imposed price controls on food and severe limitations on food exports (particularly beef, considered a staple food in Argentina) to keep the inflation from hitting common people too directly, but Kirchner's playing with fire here - he's going to wreck the internal economy if this keeps up. So, I expect some moderate peso appreciation after the elections.

  5. inggscap


    Thanks Raul,

    Yeah I remember now that article on those inflation figures and the president. Interesting.

    Thanks for that info mate.

    Kind regards