DESPARATE Argentina Reaches Out To China

In what many are saying is an effort to save the peso from devaluing and mitigating dollar flight, which has cost the central bank of Argentina $4 billion thus far this year, Cristina Fernandez de Kirchner (CFK) has struck a deal with the Chinese.  

The two countries agreed upon a currency swap that only comes into play if there is a critical situation such as a payment trigger for debt (fasten your seatbelts China, it will happen).  One could say it's a last resort insurance policy.  However, lets just say that if the insurance policy is executed then Argentines had better have already prepared for the worst. The triggering of this swap would sent a strong negative signal to everyone involved and likely result in a very negative market response.

Apparently, the swap will be implemented if Argentina's international reserves deplete to a certain level.   At which point the country would have made available to them the equivalent of $10 billion dollars in Yaun.  In exchange Argentina would deliver (swap) the Chinese for Argentine Pesos.  The Chinese government would then use the Argentina Pesos as fuel for electricity generation plants and for toilet paper. 

While the situation looks like the Chinese are helping Argentina the reality is that China must hold pesos in order to trade with Argentina.  It's much the same as China purchasing massive amounts of debt from the U.S. Treasury.  However, in this case, the peso is more like monopoly money!  Many see this as the Chinese helping the Central Bank, I do not take this view as the Yuan is an nonconvertible currency.  This currency swap should be seen as a zero sum difference upon the Central Bank's dollar issue in the long run.  Simply put, the swap is taking place for trade purposes.

Recently the Kirchner clan implemented a new 'whitewashing' bill or amnesty bill that would allow Argentines who illegally and secretly harbor undeclared dollars to come clean.  The idea is for these otherwise intelligent Argentines to exchange their undeclared dollars for worthless government promissory notes or bonds.  These pieces of paper, backed by the full faith of CFK and the Argentine government, can be utilized to invested in oil and gas development, real estate and construction.  There is to be no tax associated with the newly "cleaned" money.  The main instrument in the tax amnesty or whitewashing bill under consideration in Congress which would enable Argentines to exchange their undeclared assets and dollars for equivalent government promissory notes and/or bonds yielding 4% per year, which could be invested in the real estate and construction industry or in oil and gas development. There are no tax consequences for revealing your dollars and the bonds will yield 4% annually.  Of course, these dollars would automatically boost the Central Bank's dwindling reserves.

I can't imagine a situation where an Argentine, intelligent and wealthy enough to stow away dollars, would choose to trade them for paper backed by a government who continually defaults, with pride, on their debts.  Nor can i imagine the dose of morphine it would take to get an Argentine to invest in gas and oil when CFK is likely to nationalize the assets in the future as she did Repsol's YPF!?!

The "Blue Dollar" In Argentina

The word "Black Market" typically congers up images of shady characters selling radios from the trunk of their car.  There has always been a black market, or as it's called in Argentina, a "blue market" for world currencies in Argentina.  And it's not just shady characters or the wealthy who take part.  Now every Argentine with a job is avoiding the peso like a one night stand.

Since the Argentine government began regulating the purchase and sale of dollars, effectively making it illegal to do either, the blue market has taken on a life of it's own.  President Cristina Fernandez de Kirchner (CFK) is fearful of running out of dollars in order to pay the countries debt.  Consequently, she and her cabinet clamped down on dollar trading.  Like most of CFK's policies it was akin to putting a band-aid on a severed arm.  As with any draconian government controls the black market doesn't pay heed to rules and regulations and will tell the real value of products and services....in this case the value of the dollar.

Currently the Fx is trading around $5.18 pesos per dollar while the so called "Blue Dollar" recently set a new record of $9.40 pesos per dollar.  That is a $4.22 peso difference or 81% premium over the Fx market.  An estimated $10-40 million dollars are change hands everyday under the table throughout the Argentine.  Pages have even been setup on Facebook called "Dolar Blue" in large cities like Buenos Aires and Cordoba to help facilitate the buying and selling of dollars.  As expected iPhone App developers are getting in on the game with "Dolar Blue" applications that tell you, in real time, rates of the parallel and official markets.

So, why is the gap between the Fx and Blue markets so great and growing daily?  There are several reasons but I will touch on a few of the most important ones.  First, inflation is and has been out of control for several years. The government is printing money at a break-neck pace with no end in site which will continue to push inflation upward.  Over the next 12 months inflation is expected to reach 33%.  With the pace of goods and services outrunning the peso, even with price controls in place, savvy Argentines are hedging by accumulating dollars. 

The economic crisis of 2001 is not a distant memory for most Argentines, many of whom are still recovering from it's effects. Holders of pesos were devastated when the dollar and peso which were at par were allowed to float.  In the mind of Argentines the dollar remains the safest asset to hold in case of a devaluation. When CFK put restrictions upon buying dollars last year the blue market began to surge and has gained momentum ever since.

The psychological factor is playing an important roll as well.  The increase in the price of dollars is becoming a self fulfilling prophesy.  As the perceived panic of getting rid of pesos spreads throughout the country the competition for scarce dollars is intensifying and thereby driving the dollar higher in the blue market.  In a sense no one wants to be left holding the last peso when it plunges.  Consequently, there is a sense of urgency that is becoming more prevalent almost by the day.  

In real life the difference between the parallel and official markets can make everyday life interesting if not difficult.  I have a gringo acquaintance who went to an airline office to purchase a ticket to Buenos Aires.  The person at the desk suggested he purchase the ticket online using a credit card in order to save 15%.  He declined the offer because even with the 15% discount the exchange rate that the credit card company would have given him would have been in the neighborhood of 5.15 peso to 1 dollar.   Recently, he had sold his dollars at 80% premium to the 5.15.  Consequently, paying via MasterCard would have cost more even with the discount.

So, in the end, who loses?  Those who aren't sophisticated enough to understand the ramifications of holding on to their pesos rather than buying dollars.  Interestingly, these are the same people who put CFK into office....twice.

"We Don't Talk About Inflation In Argentina"

Recently a video of Hernan Lorenzino, Argentina's economy minister, was released and quickly became an internet sensation amongst Argentines.  Apparently, he believed that he was to play patty-cake with the Greek reporter whom was interviewing and assumed she knew nothing about Argentina much less anything about the economy and inflation.  He was wrong.

The female reporter asks Lorenzino directly, "I have a very simple question for you that seems very complicated these days.  How much is inflation in Argentina at this moment".   The look on his face was golden.   If you've read my blog you know that the government office (INDEC) which is in charge of inflation statistics was ransacked by the Kirchner government in 2007.  The old employees were replaced with Kirchner cronies and told that inflation would be whatever the president says it is.  Consequently, inflation has been wildly under-reported since that time.  Over each of the last five years inflation has hovered around 25% while the INDEC has reported around 10%.

Because most media in Argentina is controlled directly or indirectly by the current administration which utilizes it for it's propaganda campaigns Lorenzino was unprepared to be questioned about inflation.   No one in Argentina would dare ask a question!

The video shows a visibly shaken Lorenzino who can't seem to talk his way out of the bad situation.  What was his response to this seemingly simply question?  "Official statistics show month after month the inflation and this is the only inflation possible, that provided by the official stats office. The only office with the capacity to measure any statistic is the INDEC that comes under the Economy Ministry".  He was clearly speaking from a defensive position by indicating that the only possible inflation that could be correct is that which is calculated by the INDEC.  Last year several independent economists were fined up to $500,000 pesos each for providing "false" inflation statics.

The journalist retorted, "But how much is it".     She obviously didn't realize that she was not supposed to ask questions regarding something as touchy as inflation.  That didn't stop Lorenzino from dancing around like a rookie boxer trying to avoid the jabs of his more skilled opponent.   He indicated that over the last 12 months inflation was 10.2% and the he may be off by a decimal.

The journalist did not stop there.  She pointed out that the IMF threatened sanctions against his country if they did not 'repair' the problem of providing false statistics.  "What will you do about that", she questioned. (The IMF did eventually censure Argentina last February).

This question was the knockout punch.  Lorenzino couldn't handle any more. It was apparent that he was not going to be able to salvage the interview.  In the final moments he said to one of his aides, "I don’t know, I don’t know. Can we turn off the camera a moment? I want to leave."  At that time the camera was put aside but not turned off.  We can still hear him speaking, "Furthermore, to speak about inflation statistics in Argentina is very complex."  He went on to say that he just wanted to leave it with the last statement and be done with the interview.  
 
The rest of the encounter was captured on audio with the camera pointed towards the journalist.  After Lorenzino makes a hasty exit one of his aides is heard explaining to the journalist, "We never speak about inflation, not even with the Argentine media."

Apparently, the interview was conducted sometime in December 2012.  Why the Greek television station waited to air the piece until now is up for debate.

Living in Patagonia is like....

When people ask me what it's like living in Patagonia, I tell them it's like walking in cold molasses.  Everything and everyone moves slow.  It's one of the best places on Earth to live, if you don't "NEED" to get anything done.  The second that something important needs to get done the beauty of Patagonia fades behind bureaucracy and/or laziness...Example:

Knowing the challenges of living in Patagonia I thought I was prepared as I began to change my timing belt and alternator on my truck.  As usual, my expectations were set too high.  Out of 4 replacement parts they sold me 2 of them were "close" but not correct, one of them was correct and the 4th wasn't even for an automobile.  Fortunately, my MacGyver like training while growing up Star, Idaho allowed me to "refine" 2 of the 4 parts (read cut to fit).  The other was the timing belt itself so MacGyvering was not a good option.  In the end and after 3 solid days of head scratching and dremel cutting the truck functions again.  This is normal life in Patagonia.

You see, in most any first world country even an idiot would be able to plug numbers into a piece of computer software and cross reference the correct part.  Here, they are still using the old fashioned books.  Unfortunately, the books can be outdated or have only one option for a particular model or engine.  In this case, you get that option or nothing.  

The Sky Is Falling In Argentina!

Over the last couple of years it has become painfully obvious that the Argentine economy is solidly on the road to ruin.  Since 2001, which ushered in the largest economic crisis since it's independence, Argentina has been a roller coaster of ups, downs and patchwork regulation.  While economists have warned them to slow down domestic growth Argentines have ignored the advice and rolled full steam ahead.  The result is now upon us.

 The above chart was issued by The Economist in June of 2011.  The effects of this overheating are being realized today.


The simple truth is that the Peronists have not learned from history.  They have failed to realize that the last decades breakneck growth needed to be managed and slowed in order for it to be sustained.  Instead, they increased their transportation and energy subsidies and spent even more on social programs.  These were funded by nationalizing private pension funds but as spending continued to grow they ran out of other peoples money to give away.

They fixed this by nationalizing YPF, the nations largest petroleum company.  It's difficult to say which private entity will be stolen next when the YPF coffers run dry.  For now the Central Banks is busy printing money.

The Argentinian economy is losing about $2 billion per month due to subsidies and populist spending increases.  The country either needs to diversify it's exports or learn to get along with other countries.  If they could behave themselves and resist the urge of being arrogant other countries might be willing to increase imports of Argentine commodities and goods enough to catch up with the governments spending.    The only other option is to continue government spending which will increase inflation which is expected to reach 33% over the next 12 months!  In short, Argentina is out of options.  The alligator must get paid and he is knocking at the door.

Argentina's Grocers Conspire To Oust Visa & Mastercard In Lui Of There New "SuperCard"

Just when we thought the Cristina Kirchner government couldn't do anything more ludicrous she manages to stun the world by allowing supermarkets to squeeze out credit card companies.

This time she is going after the 'boogyman" which, in this case, is big business.  These are the horrible entities that pay employees their salaries who, in turn, pay taxes.  They are the same business that pay the lion's share of all taxes in Argentina.  So, why not beat these "monsters" over the head in the name of "protecting" the sheep.  Because they won't share the wealth with Cristina! 

 Argentina's Domestic Trade Secretary, Guillermo Moreno, and his cronies came up with an idea that would villainize credit card companies and at the same time put money in the state coffers.  The countries largest grocery chains boycotted Visa, MasterCard and others and introduced the "Super Card".  Yes, the Argentine government is now in the credit card business with super markets.  Because they are benevolent they will only charge consumers 22% APR.  Very generous indeed?  I wonder what Cristina's share will be...

So, how did this all come about?  The largest supermarket chains met with government officials with the idea to squeeze out the credit card companies.  Everybody wins, right?  While they will pay less interested, Argentines who wish to utilize a credit card will be forced to use one issued by there government. 

On the surface this may not seem to be all that important but let me tell you where this ideology is headed.  At some point in the future, if the government continues in the same populist direction residents of Argentina will not have the choice of which card to use.  There will be one card and it will be the Super Card issued by the government.  We will not be allowed to make cash exchanges at grocery stores.  This will be a way for the government to track all purchases and sales.  Avoided/evading taxes by being paid in "Negro" (under the table) will become evermore difficult as the government tracks your spending.

This all sounds a bit far fetched however I truly believe some form of mandatory card is coming our way in the not so distant future.

The New Argentina Pope

Does the pope shit in the woods?  Is a bear Catholic?  "Who cares", is what most Argentines in Patagonia are saying.  While the vast majority of Argentines call themselves Catholic most do not even attend church services.  So, when you ask them what they think about the pope being chosen from Argentina most just shrug with indifference. Ask them about the price of beef and you'll likely get some lively discussion.

Argentina, England, Malvinas and the Falklands

Living in Argentina has afforded my to opportunity to view the Malvinas/Falklands dispute from a slightly different perspective than the average observer from outside the country.

First, let me begin by delivering a statement of fact.   When the economy is on the verge of collapse the Argentines begin their saber rattling against the English in regards to the Falkland Islands.  If you are an economist, trader or anyone else with a stake in the Argentine economy you would do well by monitoring the level of bullshit being stirred by the government of Argentina.  In fact, I would go as far as to say that if one was to chart current economic indicators against the "Argentina Falklands Bitching Index" he would be able to predict the next crisis with precision.

Currently, the Argentine government (Cristina Fernandez de Kirchner) is standing atop a skyscraper beating their fists against their chests claiming that the Falklands were filled with "implants" from England and that the Islands belong to Argentina.  This ideal would be paramount to the United States claiming that Cuba is their property and that all Cubans should get out to make room for the "original" inhabitants.

If one takes time to do a bit of research he will find that the Argentines are exhibiting wildly hypocritical behavior with little shame at all.  Before Argentina became a country it was inundated by Italians and Spanish immigrants.  In fact, they made it a point to kill the natives in order to make room for themselves.  How is that different from any other colonial country?  It is EXACTLY the same!  There is no difference from the Italians, Spaniards, Americans nor the English.  They are ALL colonialists. 

There is no question in my mind that the Argentines would love to "own" the Falkland Islands and yet they know as a 100% fact that this will NEVER happen.  It is just another red herring to keep the less educated Argentina population from focusing on the fact that they are living with inflation that has averaged 24.6% yearly over the last 5 years.  Yes, we pay 125% more for everything than we did 5 years ago but give us the Falklands now!  Truth is, the average Argentine could give a shit less about the Falkland Islands.  They are more worried about how they are going to feed their children with prices of food becoming ever higher.

Is it any wonder why the Kirchner government and others before hers continue to attempt to divert attention away from their on failed policies.  Sadly, it seems to be working on much of the population who put the socialist/populist/communists in office.  This, unfortunately is the majority of the poopulation of Argentina.  While they are "literate" they are definitely not educated.

Venezuela Finally Admits That Chavez Is Dead

Speculation began weeks ago as to the state of Hugo Chavez' health and whether he was, in fact, already dead.  Today the Venezuelan government finally admitted the Chavez is dead. Guess what else.... It's the U.S.' fault!  Apparently, we gave him cancer.  Of course this is typical of all South American countries who never seem to take responsibility for their own ills but rather point to the U.S. anytime something goes awry.

After much speculation and absolutely no sightings of the president, the government has finally sufficiently put things into place.  Now they can anounce his death.  Of course, this didn't happen until the big bad wolf (U.S. Ambassador) was given 24 hours to exit the country for supposedly speaking to military leaders...

So, is the world waiting with bated breath as to whether the Venezuelans will choose a new leader and a new direction.  No.  Another Bolivarian jackass has already been chosen to lead the sheep further down the path of communism.  Bravo!  So, who gets the $2 billion that he stole from the people of Venezuela?!  Certainly not the Venezuelans that he stole if from!!!

He counted amongst his friends Saddam Hussein whom he referred to as his "brother", Robert Mugabe whom he referred to as a "freedom fighter", Alexander Lukashenko (Belarus) whom he said he admired, and Bashar al-Assad whom he said "share the same political vision” as his Bolivarian idiots in Venezuela. Chavez loved Gaddafi and asked god himself to protect the life of "our brother".  Lest not forget the Carlos the Jackal who rejoiced in the 9/11 and whom Chavez called "a good friend".  What more can be said about the greasy dead turd Hugo Chavez?  He loved anyone who hated the U.S.  He easily set aside that they were murderers, thugs and thieves (likely because he was on himself). 

And Argentina?  What will Cristina Fernadez de Kirchner do now that Daddy Worbucks is dead?  Well, they managed to borrow money from everyone in the world and still refuse to pay them back.  The only one fool enough to help them these days is now admitted to be dead.   Perhaps the GREAT Fidel Castro who has ruined Cuba by oppressing his subjects and stealing every last dollar to be had from them... perhaps he will be the one to step up?  Nope...he was on the Chavez dole as well.

Unlike Chavez, Castro and his brother Raul are money grubbing stingy bastards.  Chavez was, at least, "kind" enough to bankrupt his country on behalf of other countries like Argentina and Cuba.

Don't hold your breath folks....get in line for more of the same old bullshit.

UPDATE:  Sean Penn is seen weeping at a Hollywood restaurant and caught applying salve to his enormous vagina....The communist little douche-bag has the luxury of supporting Chavez without having to endure his reckless policies. He may be the biggest hypocrite of our time.

Chubut Province Estancias (Ranches)

THIS LIST IS A WORK IN PROGRESS.  Please feel free to add to and expand this list!

Esquel & Trevelin Estancias:
Estancia Name		Owner	City/Town
El Corinto		Luciano Garzonio	Trevelin
Estancia Amancay		Estancia Amancay	Trevelin
La Franca		Omar Mohuanna	Languiñeo
Las Aguilas		Andres Kruger	Los Cipreses
Baguilt		Ricardo Perez	Baguilt
Los Mallines		Tonacagi S. A.	Lepa
Los Manantiales		Carlos Angel Mottino	Pico Salamanca
La Angelita		La Angelita S.R.L.	Gaiman
Rayhuao		Sucesión J. C. Canessa	Pilcaniyeu
Cañadón Faquico		Elena Juana Jenks	Río Mayo
Shaman		Shaman Pastoril S.A.	Gobernador Costa
Tecka		Cia. de Tierras Tecka S.A.	Tecka
Leleque		Cia. de Tierras Sud Argentino S.A.	Leleque
El Kaquel		Ivor E. Hughes	Tecka
Cristina		Oscar M. Acuña	Gobernador Costa
La Generosa		Feliciano Abril	Camarones
Horno Viejo		Miguel Uriz	Sierra Colorada
Malal Cume		Carlos Neira	Trevelin
Arroyo Verde		Paihuen S.A.	Alto Río Senguer
Don Ambrosio		Roy Roberts	Esquel
Laguna del Toro		Otamendi y Cia S.R.L.	Gobernador Costa
El Principio		Estancias Schajman S. A.	Esquel
Ganadera del Valle		Ernesto Ayling	Sarmiento
Río Pico		Julián Gonzalo	Río Pico
El Cóndor		Rhiannon Ap Iwan de Gough	Esquel