By John Mauldin
I remember coming to Argentina about three years ago. I thought prices in Buenos Aires were high – the peso was about 3.50 to the dollar. When I visited again last November, prices were “reasonable” by my travel standards, and here in Cafayate I found good value. I have friends who are building homes here much more cheaply than they could in the US. And the quality is high; there are some real craftsmen here. Their stonework is exquisite.
I was in Buenos Aires last Friday. The official exchange rate is now 5.50 pesos to the dollar. The street price is 7.75, on its way to 8. But the largest bill is a 100-peso note, which is now worth less than $13. Using a credit card costs at least an extra 10%, if not 20%; but the prices you are quoted for using a credit card instead of cash are higher to start with, before the surcharge, so using a card ends up costing you about an extra 40%. But you need to carry a lot of cash if you want to buy anything expensive. (Be very careful if you do not know your way around. I am told there are lots of counterfeit bills passed off on tourists. Not that I exchanged anything, of course this is all theoretical, for illustration purposes.)
I was staying in the Recoleta area, which is one of the most expensive areas of the city and a wonderful place to while away a day or two.
But things were cheap. A simple lunch for two on a fashionable street was around $15. We had a fabulous meal at a restaurant we stumbled on, called Sirop Folie. (I will go again!) It would have been $150 at a comparable place in Dallas or NYC (or Europe), but it cost us just $50, including tip. I left my computer mouse in Dallas but was able to pick one up for $6. Vegetables and cheeses were around half what I am used to paying in Dallas. I began to “shop” in order to look at prices. By US standards, Argentina is on sale. And this was in the high-rent district.
On the way to Cafayate, there were signs on the road for chicken dinners for the local trade priced at $2 equivalent. Our dinner last night for two was less than $40 (all in) at what is considered one of the better local restaurants, Vinas de Cafayate (fabulous menu!). The place was packed by 10 pm, as I was leaving. So Argentina seems inexpensive today. Not a definitive study, admittedly, but the trend is clear.
President Kirchner is again experimenting with price controls. (Peron infamously tried to control even restaurant menu prices in the late 1940s – you’d think he would have known better). The last time price controls failed was in 2005. Now, Argentina has limited beef exports in the futile hope that doing so will drive down beef costs. All that has happened is that cattle herds have been reduced and exports are down. Similar export controls to try to keep bread prices down have seen wheat production fall.
Brazil has seen its cattle exports explode in 20 years, while Argentina’s have not grown at all as the government tries to control production and export prices. Argentina used to be the world’s largest beef exporter, but Brazil now has a herd almost four times the size of Argentina’s. How many jobs have been lost to Brazil? One long-time exporter says, “There are developed countries, emerging countries, and then there’s Argentina.”
Want to see something sad? An illustration of what governments can do to an industry by trying to control it? Look at this chart. Argentina is now down at #11. Tiny neighbor Uruguay exports twice the beef and veal.
The government is committed to a path of monetization. Inflation is denied by government statisticians, but it is at about 30% and rising. While the government is putting pressure on grocers to maintain prices, which always leads to shortages, as of this morning you can still find anything you want at the local equivalent of a well-stocked Hypermart.
Why Don’t You Just Stop?
I sat down for what became a lengthy conversation with Juan Carlos Romero, the current senator from Salta Province. Juan Carlos is my age (which is to say a young 60ish) and is the very image of as an old-style patron, straight from central casting. He was governor of the province from 1995 to 2007 (it’s the family business – his father was governor, too) and has been vice-president of the senate and on a national presidential ticket. He is a very successful businessman. We met last time I was here, and I hit it off with both him and his son, Juan Sebastian.
I related to him my surprise at prices and inflation. The last time I was in the Recoleta, in November, there was a protest march (quite peaceful and civilized, if enthusiastic and noisy) of some 700,000 people in the center of town, along 9 de Julio Avenue, which is the widest avenue in the world. It is impressive to walk down.
But things have only gotten worse since then. “Haven’t you seen this movie before?” I asked. “Don’t you know how this ends? What part of seeming insanity do you keep wanting to repeat? Why can’t you stop it?” I will summarize Juan Carlos’s answers from the notes I took.
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KaD says:
http://www.mongabay.com/brazil.html
DEFORESTATION IN BRAZIL: 60-70 percent of deforestation in the Amazon results from cattle ranches
THIS is why McD’s can sell a beef burger for $1.00.
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13th March 2013 at 10:34 pm
Stucky says:
In all seriousness, I must say, I am totally shocked that INDIA ranks first in beef / veal exports.
Aren’t cows sacred in India???
Cow in a video store in India, looking to rent “Eat more chickun”
Well-loved. Like or Dislike:
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13th March 2013 at 5:31 am
Thinker says:
Stucky, I caught that, too. Shocked, to say the least. Something I’ll have to research.
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13th March 2013 at 10:00 am
Cynical30 says:
They’re sacredly delicious!
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13th March 2013 at 10:47 am
KaD says:
Here’s someone else who sold Argentina down the river- the NEW POPE: http://www.huffingtonpost.com/2013/03/13/pope-francis-kidnapping_n_2870251.html
“The election of Pope Francis, previously Cardinal Jorge Mario Bergoglio, has resurfaced a decades-old controversy surrounding the kidnappings of two Jesuit priests.
Bergoglio was a high-ranking official in the Society of Jesus of Argentina when a military junta was installed in the South American country in 1976. According to the Los Angeles Times, priests Orlando Yorio and Francisco Jalics were kidnapped in May of that year by the navy. “They surfaced five months later, drugged and seminude, in a field,” the Times reported. A 2005 lawsuit accused Bergoglio of unspecified involvement in the abductions. Reuters explains that “the military government secretly jailed [Yorio and Jalics] for their work in poor neighborhoods.”
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Great judgment, cardinals. You’ve replaced a criminal coordinator of the baby-raping scandal with a certified Fascist who sells his own, and the poor, down the river. That ought to bring back the flock.
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13th March 2013 at 11:28 am
Persnickety says:
OFFICIAL CATHOLIC PRESS RELEASE
“Pope Francis – 10% less evil than Pope Palpatine!”
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13th March 2013 at 2:37 pm
Thinker says:
Stucky, a couple of updates; it turns out it’s likely not all beef, but bison or water buffalo. Killing cows is still illegal, but they can kill buffalo as long as it’s not milk-producing.
http://edition.cnn.com/2012/04/18/business/beef-trade-india
http://en.mercopress.com/2012/11/07/india-becomes-main-world-beef-exporter-in-2012-and-probably-2013
http://www.theatlantic.com/business/archive/2012/05/holy-cow-india-is-the-worlds-top-beef-exporter/257793/
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13th March 2013 at 4:05 pm