|The Daily Reckoning Presents|
“Hablar del precio del dólar paralelo es un acto de ilegalidad,” el Ministro del Interior, Florencio Randazzo, squawked into the cameras earlier this week. [Rough translation: “To speak of the price of the parallel dollar is an illegal act.”]
The parallel dollar, or “dolar blue,” to which Randazzo refers is the unofficial exchange rate offered by the city’s casas de cambios. And thanks to the government’s draconian capital control measures, this rate is about the only rate you’re likely to get.
The Argentinean government’s policy of theft via inflation has created a demand for the relative safety of US dollars. Obviously, a massive flight from pesos would create considerable headaches for the Argentine State and its efforts to control “its” people...and their taxable income. And so, even though there is no official rule preventing the purchase of US dollars (or any other foreign currency), Argentina’s equivalent to the IRS, AFIP, has made it virtually impossible to do so through regulated channels (i.e., banks).
Therefore, the informal exchange houses do a roaring trade responding to a very real and honest demand for US dollars. And there’s still enough business left over to maintain a vibrant market for the “green rate.” This exchange rate is even less official than the unofficial “blue rate.”
The “green rate” is offered by los arbolitos — i.e. “little trees” — who stand along Florida Street waving their arms (like little trees) and offering their exchange services. That rate, currently at 6.20 pesos to the dollar, is quite literally the “street price” for dollars.
The nearby chart shows the wide — and rapidly widening — gap between the official exchange rate and the blue rate, the most often quoted parallel dollar rate.
[To keep abreast of the various exchange rates, minute-by-minute, you can check outhttp://www.dolarblue.net.]
Exactly as you would expect, the more money the government prints, and the tighter the capital controls they impose, the greater the urgency to swap pesos into dollars...and the higher the unofficial exchange rates soar.
Clearly, this is a trend that cannot continue indefinitely.
The Argentine State is scrambling to outlaw the consequences of its own recklessness. For years now, Argentina’s Central Bank (BCRA) has brought forth freshly inked fiat notes by the billions to pay for unaffordable election promises. Our North American readers will recognize this crafty monetary prestidigitation as “money printing.”
The practice is nothing new, of course — neither here nor in any country where the tyranny of the mobjority — democracy — enjoys the power to decide the cost to be levied on the minority.
What seems peculiar about Argentina’s case is the government’s Herculean effort to ignore the immutable laws of economics in their pursuit of grand larceny. The country has seen five currencies in just the past century, averaging a collapse every twenty years or so. In 1970, the peso ley replaced the peso moneda nacional at a rate of 100 to 1. The peso ley was in turn replaced by the peso Argentino in 1983 at a rate of 10,000 to 1. That lasted a couple of years, and was then replaced by the Austral, again at a rate of 1,000 to 1. To nobody’s surprise, the Austral was itself replaced by the peso convertible at a rate of 10,000 to 1 in 1992. During the past four decades, when all was said and done, after the various changes of currency and slicing of zeroes, one peso convertible was equivalent to 10,000,000,000,000 (1013) pesos moneda nacional.
And yet...the president of Argentina’s central bank, Mercedes Marcó del Pont, earlier this year reiterated her commitment and dedication to pathological delusion when she asserted, “It is totally false to say that printing more money generates inflation. Price increases are generated by other phenomena like supply and external sector’s behavior.”
“Phenomena like supply” is correct, of course...specifically the supply of freshly inked fiat notes issuing forth from Marcó del Pont’s printing press.
Like her fellow counterfeiters further north, Argentina’s “Fed Head” maintains a steady program of peso “creation” while bamboozling the population with the kind of nonsensical justifications only a career academic-cum-politician could hope to conjure.
“We’re recovering the sovereign capacity to formulate and implement economic policy,” babbled Marcó del Pont recently before announcing that some pictures will be coming down from the bank’s hall of fame, “beginning with Milton Friedman.”
We imagine Friedman’s oft-quoted observation, “Inflation is always and everywhere a monetary phenomenon,” probably stuck in Marcó del Pont’s Keynesian craw.
This crude behavior is typical of Argentina’s government: If the lessons of history don’t agree with the state’s agenda, simply remove the lessons from the curriculum...or make abiding by them illegal. Which brings us back to Randazzo’s “speech crimes.”
If Randazzo has his way, all discussion of what might well be the gravest challenge facing South America’s second largest economy would be considered illegal; an act, says he, comparable to quoting the price of a stolen stereo.
But if merely talking about something illegal is, itself, an illegal act, would we not have to slap leg-irons onto Randazzo himself? It is, after all, the reckless monetary policies of the Kirchner government, to which he proudly belongs, that provide the very incentive for the establishment of a parallel rate in the first place. Moreover, would we not have to imprison almost every central banker and treasury secretary in the Western world? Aren’t these the same folks who continuously talk about “easing monetary policy”?
That’s just money-printing... and money printing is larceny on the grandest scale. Maybe Randazzo is onto something after all!
But, of course, he is not referring to the Argentine government’s crimes; he is referring to the supposed crimes of every Argentinian who’s simply trying to protect himself from the Argentine government’s crimes.
The soaring peso/dollar exchange rate suggests that the peso’s days are numbered...again. And the government’s characteristically strong-armed response to capital flight suggests that the government’s fiscal position is a mess...again. Therefore, given that most folk here have seen this show before, some will be tempted to ask, “How did it all come to this...again?”
As we know, Fellow Reckoner, in order to build a big mess, one must start with a small mess. After all, Rome didn’t burn in a day. Intervene here...meddle there...regulate this...tax that. Add a little larceny...a pinch of censorship...and a dollop of mind- numbing propaganda “para todos.” Pretty soon, you’ve got a full- scale political and economic disaster on your hands.
“¡Qué Quilombo!” as the porteños say, banging pots and pans from their balconies in protest. “¡Qué Quilombo!”
for The Daily Reckoning
P.S. We pick on the Argentine government because we live in Argentina. And because it’s so easy. Their record, as mentioned above, is simply appalling. But, truth be told, all governments, past and present, devolve into money printing shenanigans eventually. The temptation to inflate was too much for the Greeks and the Romans in antiquity, just as it was for the Germans, Hungarians, Poles, Brazilians, Russians and a dozen or so other states during the last century.
And let’s not forget the US, currently the world’s most aggressive issuer of “money from thin air.” Since the creation of the Federal Reserve, in 1913, the once mighty greenback has lost around 97% of its value next to gold. More or less what you’d expect from a federally-sanctioned agency charged with protecting the integrity of the dollar.
As the world waits for Bernanke’s next move...hoping...praying for the next round of “QE,” the shrinking dollar trend is only set to accelerate. So, what to do?
There could hardly be a better time to read Addison’s Little Book of the Shrinking Dollar. Co-authored with Samantha Buker, this quick, 254-page read is packed with specific suggestions (47 of them, to be exact) for how you can protect yourself against a falling currency. Don’t sit around and wait for central bankers to steal your money through inflation. Why give the bastards the satisfaction? Instead, grab a copy of Shrinking Dollar today and begin putting these strategies to use.
The grounding of two bulk carriers one in the Parana River and a second in the Martin Garcia access canal are evidence of the frail fluvial communications system between the River Plate and the Atlantic, reports the press from the port of Rosario, Argentina’s second largest city and among the world’s main grain export terminals.
Furthermore the situation is considered critical by shipping agents and the grain business in Argentina and Uruguay since in 2014 the Panama Canal will have completed its expansion and deeper dredging, which means that a new generation of vessels with more draught will be sailing sea lanes.
Last August the bulk carrier “Alexandria” grounded in the Martin Garcia River Plate canal. The vessel 179 metres long and with a draught of 8.68 metres had loaded 19.300 tons of wheat for Brazil in San Lorenzo on the Parana River.
Only a week ago “Aristeas P” another bulk carrier (189 metres long and 9.96 draught) with 30.516 tons of soybean by-products grounded in a bank of sand and mud at kilometre 390 of the Parana River, where it remained stuck for over a week in spite of all the tugs’ efforts.
Over a hundred vessels had to wait for that time, and shipments of wheat and other grains and oilseeds were paralyzed.
The development of Argentina and Uruguay and other countries from the region, producers of grains and oilseeds which are bulk transported in great volumes need of an efficient transport and freight system to remain competitive. Given the low unitary value of the cargo they are most vulnerable to the cost of maritime transport.
“These incidents are evidence of the limitations and challenges that navigation canals in the Parana River and the River Plate represent for the agriculture industry and need to be addressed on time”, said Alberto Tello, an official with the Rosario Maritime Centre.
The Martin Garcia canal is 9.75 metres deep and Argentina and Uruguay have agreed to dredge it to 10.40 metres, which has become the minimum depth for cargo traffic in the River Plate.
And what determines bulk carriers’ tonnage and size: one of the factors is the depths of the Panama Canal (12.5 metres) and the Suez canal (15 metres), and the most common vessel has been the Panamax (compatible with the Panama Canal)
However in two years time, August 2014 the ambitious expansion works of the Panama Canal will be ready and the Post-Panamax vessels will become king. Panama Canal locks depth will increase from 12.8 metres to 18.3 metres, which means more efficient and economic to run bulk carriers, and obviously with greater draught.
Currently significant delays in the port of Rosario and navigation operations along the Parana River are occurring, since vessels that finish their loading cannot set sail because of insufficient water level, and those in the Rio de la Plata cannot navigate and are waiting to be able to come up to the loading areas.
“Imagine the situation in a couple of years when the Panama Canal begins operating with 18 metres”, underlined Alberto Tello.
Por Alejandro Maglioneamaglione@lanacion.com.ar
El asunto de que haya o no nieve es más que fundamental. En Mendoza llueve poquísimo, sino no hablaríamos de que tiene una geografía árida. El secreto del agua para riego e incluso potable, radica en que la cordillera exhiba magnificas nevadas, que luego se irán fundiendo lentamente a medida que se va instalando el verano, y así el agua debe fluir pausadamente hacia los ríos, llenar las represas, y alimentar las fuentes de agua subterránea que nutren los pozos de donde se sirven los productores.
Por lo tanto, si la nieve escasea es fácil anticipar que el agua potable también lo hará.
La famosa zona de California, donde se producen los mejores vinos de los Estados Unidos, y en algunos casos, del mundo, tiene perfectamente regulada su zona productiva, desalentando y hasta prohibiendo que se construya sobre las tierras aptas para la viticultura. No permiten nada que no tenga que ver con la producción de vino.
Pude observar un mapa aéreo donde se aprecia claramente como un condado vecino vio rápidamente ocupadas sus zonas de cultivo, por áreas residenciales y de esparcimiento, por no contar con limitación legal de ninguna naturaleza a este respecto.
Mendoza IIEn Mendoza es fácil advertir que este fenómeno de desplazamiento de las áreas de cultivo por lugares de esparcimiento o vivienda se está dando paso a paso y sin descanso. Luján de Cuyo o Agrelo son apenas un botón de muestra, de una tendencia que llegó hasta el Valle de Uco, donde estando prohibido hacer nuevos pozos, se autorizaron "excepciones" para posibilitar la instalación de algún country-
Días pasados vi una excelente documental que hablaba del proceso de desertificación en Australia, sumado a la sobre explotación del río Murray, el más largo de este subcontinente con 2375 kilómetros de extensión, que cada vez aleja más su desembocadura al mar porque su lecho seco se va adentrando a la tierra más y más. La tardía queja de los productores les anticipa que necesitaran 60 años para intentar remediar el daño. Que algunos se estén despertando a esta realidad en Mendoza, no alcanza: toda la provincia tiene que pasar de la toma de conciencia a la acción para defender su industria madre, pasando del susurro al grito. Somos mayoría los que deseamos esto, que nadie lo dude.