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Thursday, May 17, 2012

Greece 2012 = Argentina 2001 Same Crash Different ...

10:06 PM John Boyle
MySpaceBA.com Blog: Furnished Apartments in Buenos Aires: Greece 2012 = Argentina 2001 Same Crash Different ...: Watching the slow motion car crash that is the Greek exit form the Euro is all to familiar to the average Argentine. They have been that don...

Greece 2012 Mirrors Argentina 2001 Economic Disaster

9:28 PM John Boyle
Watching the slow motion car crash that is the Greek exit form the Euro is all to familiar to the average Argentine. They have been that done that and gone step by step through every little horror show that the Greek population are now enduring.
   A brief history of the Argentine crash.
1976-83 Military Dictatorship. 30,000 Argentines Murdered by the state.
83-90 Weak demorcracy and hyper-inflation
1990 Argentine peso pegged one to one with the U$S
Dec 2001 Argentina defaults on over 100 billion U$S of Public Debt.
   The key to the Argentine crises is in the peg to the U$S Dollar.(Much as Greece is pegged to the Euro) It stopped the inflation and it brought an end to the chaos. But it also pinned Argentina to the US currency and in the 90s Bill Clinton was US president ,he had a balanced budget and a very strong Dollar. This made Argentina very uncompetetive with other countrys in the region and by 1998 Argentina plunged into a deep recesion. (As Greece did in 2007)
    At this point both coutrys needed to be able to have some wriggle room to kick start their economys. Both were given more loans and dragged deeper and deeper into debt.

   In Buenos Aires the capital flight bagan and Argentines shipped over U$S100 billion Dollars to the safety of US banks. Mainly in Miami for some reason. For this they received 4% interest and the security of knowing that their money was in real greenbacks and not the pegged peso that was being used in Buenos Aires.
  The Argentine Government finding the coffers were empty had to go to the lending agencys (the US banks) and borrow back the money but at 16%.
In Greece the capital flight is all but over ,thought this week its citizens still managed to pull another 800 million Euros out of the system before its innevitable collaspe.
The bigger suprise was that any one still had any money in those banks in the first place. The greek goverment finds itself paying at least 16% to borrow back the money that its own citizens have sent abroad.
   When Argentina finally defaulted the country exploded in rage and anyone who still had money in the bank lost 70% of their savings from one day to the next. And millions lost their jobs and food kitchens were set up all around the country in order to prevent starvation.
    I remember walking past the Parliament Building(Congresso) at about 8pm in Febuary 2002 and seeing hundreds of people queing for food. What struck me most was that this food kitchen was right in front of Government building so that the politicians could not help but see the mess they had been a party to.
   The default though very harsh set Argentina free and soon growth returned and for most years since the economy has grown at over 8%.This year growth is forcast at 4%.
Peoples savings were decimated for example U$S100 became $100 pesos approx U$S33. But if you had a mortgage of US$100,000 that became $100,000pesos Approx U$S33,000. So there were also winners.
    Much of the Billions that had been removed off shore returned and a building boom took off. Argentina became one of the cheapest places in the world ,so tourism took off and hotels shot up all over the country.
    So with Greece the imediate future is bleak but there is a silver lining. The money to kick start their economy is already in place . Just overseas or in Banco de la Mattress
or in safty deposit boxes. And its Greek money that they have not had the confidence to spend in a recesion hit economy. When they see the first signs of growth the money will flood back in as it did in Argentina.
  The down side of default is the vulture funds.  They will buy distressed and defaulted bonds for cents on the dollar and sue for the full amount. Thus leaving default and accessing the global finance markets becomes impossible until these vulchers have been paid off.
   Argentina has still not exited default and so long as comodity prices remain high maybe she will soldier on without the international markets.
   But i will always remember the saying i heard in Buenos Aires in 2002.
If you owe the bank a thousand dollars its your problem.
If you owe the bank 130 Billion dollars its their problem.
JB
Buenos Aires




Thursday, May 10, 2012

Currency Exchange Buenos Aires The Informal Dolar

10:06 AM John Boyle
    Getting your hands on the almighty U$S Dollar in Buenos Aires is fast becoming a game of whispers trust and and meetings in tiny offices where the money is counted quickly, handshakes are exchanged and the deal is done. No names are asked and any conversation is minimal.
   The reason behind this is that the Goverment in order to stem capital flight has made it almost impossible for Argentines to buy the Dollar legally at todays rate of $4.53 pesos (2nd July 2012) to the Dolar. Hence the Argentines are seeking out the black market and paying over $5.93 pesos each for Dollars. Why would they do that you ask? Simply because inflation in the pesos is out of the bag and there is no earthly point in holding a currency that devalues at approx 20% per annum.
    The knock on effect of the dollars drying up has been to stall what was a vibrant housing market and bring new starts in building projects to a grinding halt. With asking prices coming down by 10% and more and the potential buyers still not showing an interest. The fact is that just holding onto the Dollars now looks safer than the property market.
    Import restrictions have sent locally produced goods through the roof, as the local producers are always quick to exploit a captive market. And the removal of the opposition means Xmas has come early.
  In short Argentina needs to deal with the inflation or it will continue killing off one bussiness sector after another.
   The latest sector to find itself struggling is Hotels, As with fixed costs rising at 20% per year (minimum). They cannot pass this on to the tourists and any sudden down turn leaves them very exposed to high fixed outgoings and very low tourists numbers.
   Only a few years ago Argentina had more than 200 hotels either in construction or about to break ground. Now it has many hotels on the brink of going bust and not much sign of a light at the end of the tunnel.
   Many tourists are findings the furnished apartment rental market to be a much cheaper option with companys such as www.myspaceba.com offering over 260 different furnished  apartments to suit all budgets and in all the major barrios of Buenos Aires. As apartments don't have staff costs as such they have managed to fend off the ravages of inflation and have become a bastion of good value in troubled times.
   Remember as the tourist coming in ,You have the stronger currency and therefore the advantage in all most all negotiations, You should try to use this to your advantage.
Buenos Aires is a fantastic city and there is still great value to be found, and you can still eat the best beef and drink great red wines at very reasonable prices.
Yours
JB
www.bataxis.com

  
    
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