Wednesday, July 3rd 2013 - 04:08 UTC

Give Us Your Real Dollars for Our Fake Dollars: Argentina Credit

President Cristina Fernandez de Kirchner’s wish of being able to print dollars is coming true as the central bank begins issuing dollar-denominated certificates today that trade in pesos.

Argentina is issuing the certificates, known as Cedines, as part of a tax amnesty plan to attract undeclared cash back into the economy. The nation’s foreign reserves have fallen at the fastest pace in more than a decade to a six-year low of $37.2 billion, as Argentina uses the money to pay debt instead of borrowing dollars at interest rates that are more than double the 5.95 percent average in emerging markets.

Fernandez, who said last year that it was unfortunate she didn’t have a “little machine” to print dollars, is trying to tap some of the estimated $160 billion held by Argentines under mattresses or in bank accounts abroad, to ease dollar demand stoked by more than 30 measures that she has imposed since 2011 to restrict access to foreign currency. While the measure is designed to provide individuals dollar-backed claims that can be used for real estate and energy projects, Empiria Consultores says Argentines will just exchange them back for U.S. currency.

“The deliberate intention of the government is for the Cedin to trade like a quasi-currency,” Hernan Lacunza, a former general manager of the central bank who runs research firm Empiria, said by telephone from Buenos Aires. “People will probably go running to exchange them for dollars as soon as they can so the effect on reserves will be ephemeral.”

Dollar Hoarding

 A central bank press official, who isn’t authorized to speak publicly, didn’t respond to a telephone message seeking comment on reserve levels and the tax amnesty plan.

The Cedin “is an ideal medium for the payment of U.S. dollar obligations,” and can be used for buying products from house appliances to construction materials, according to the law approved by congress May 29,

Argentines with undeclared foreign-currency savings have until Sept. 30 to trade their dollars for a certificate of deposit for investment, or Cedin, which will be traded in financial entities and foreign exchange agencies.

The government estimates citizens have undeclared funds of more than three times the nation’s foreign currency holdings. Argentines hold about one in every 15 dollars in circulation worldwide, according to Federal Reserve, U.S. Treasury and Secret Service estimates.

‘Little Machine’

Argentines with undeclared funds leave themselves open to investigation by the tax authorities and an offense is punishable by jail time. The plan will attract about $2 billion, newspaper Clarin reported June 28, citing a report by Banco de la Nacion Argentina state bank.

Fernandez, 60, is trying to shield reserves at a time when the nation’s energy imports are surging and its trade surplus narrows.

“Unfortunately for me and for most Argentines, I don’t have a little machine that makes dollars,” she said in a November speech in Buenos Aires.

The central bank’s foreign currency holdings have fallen by $6.1 billion this year and will decline by $4 billion more as the nation pays its bondholders. Central Bank President Mercedes Marco Del Pont said on May 9 that the net effect of the tax amnesty plan on reserves will be neutral.

‘Opportunistic Strategy’

The government will have to guarantee that individuals can exchange the Cedines for dollars to attract funds, which would keep the value of the peso from falling further in the black market, according to Hernan Yellati, head strategist at BancTrust & Co. in Miami. Money invested in real estate and energy can also help bolster economic growth ahead of congressional elections in October, he said.

“This is an opportunistic strategy to lower the parallel rate, control inflation and at the same time give a boost to economic activity before the election,” Yellati, who expects about $1.5 billion will enter through the tax amnesty plan, said in an e-mail.

The reference value for every $100 of Cedines, is 90 for purchase and 93 for sale, for an implied exchange rate of 7.2 pesos per dollar, according to a recently created website called Cedin Trading.

That rate would be weaker than the official rate of 5.3903 and stronger than the black market where Argentines pay as much as 8 per dollar. A fourth rate used for financial transactions by swapping bonds and stocks was 7.8257 at 4:26 p.m. in Buenos Aires.

The extra yield investors demand to hold Argentine government dollar bonds instead of U.S. Treasuries fell 19 basis points, or 0.19 percentage point, to 1,180 basis points, according to JPMorgan Chase & Co.’s EMBI Global index.

Property Sales

Fernandez is seeking to reverse a rout in property transactions after her ban on buying foreign currency almost paralyzed the dollar-based market.

Undeclared dollars can also be traded for a government-issued bond maturing in 2016 that will pay a 4 percent annual interest rate that will be used to finance the energy industry and state-run YPF SA.

The tax amnesty plan will probably fail as it isn’t addressing inflation, which is the cause behind the decline in reserves, said Daniel Volberg, an economist at Morgan Stanley.

Consumer prices rose an estimated 23.4 percent in May from a year earlier, according to private economists.

“The real driving force for why we have reserve losses, why you have poor confidence, and why you have poor growth in Argentina is inflation,” he said in a telephone interview from New York. “We have plenty of experience with exchange rates that are misaligned and that are being propped up by a combination of intervention and capital controls, neither of those measures work.” (Bloomberg)

 

55 comments Feed

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1 Anglotino (#) Jul 03rd, 2013 - 05:17 am Report abuse
Oh God. Argentinean government policy.... the joke that just keeps giving and giving!
2 CJvR (#) Jul 03rd, 2013 - 06:21 am Report abuse
Poor KFC, if only she had a magic box producing free wealth her problems would be over. It is rather amusing watching morons who have absolutely no idea what they are doing trying to run a country.
3 toxictaxitrader2 (#) Jul 03rd, 2013 - 07:27 am Report abuse
Idiots get elected everywhere in the world!
but in Argentina the weakness, politicization and corruption of the civil service fails to correct their mistakes .
4 Mastershake (#) Jul 03rd, 2013 - 07:44 am Report abuse
So, according to history, how long is it til Argentina crashes and defaults again? New pseudo currency always comes out shortly before another crash/default in Argentina, right? So does this give us a time frame/ETA of implosion?
5 Welsh Wizard (#) Jul 03rd, 2013 - 08:29 am Report abuse
Patacones?
6 Usurping Pirate (#) Jul 03rd, 2013 - 08:30 am Report abuse
If properly managed , the whole of Argentina would be a machine for printing dollars . If properly managed .
7 Trunce! (#) Jul 03rd, 2013 - 08:33 am Report abuse
“Argentina has a history of resorting to funny money or emergency bonds as a substitute for cash in times of financial crisis, such as Patacones and Lecops.”

www.ft.com/cms/s/0/d4612bf8-e194-11e2-b796-00144feabdc0.html#axzz2Xy8zBiHa
8 zathras (#) Jul 03rd, 2013 - 10:43 am Report abuse
The is quite outrageous. The Argentinian economy is in free-fall. The governments solution: Give us your hard earned foreign currency. Can't imagine the Trolls will have much to say about this except to tell how much worse it is in Turkey or Ireland say. Seriously the Argentinian Government steals an oil company yet is now producing less oil. It is unable to pay the Foreign debts it owes. So orders the people to hand over their foreign currency. The judiciary should declare such measures illegal. Given The Argentinian history of failing to pay it's debts, hyperinflation and revaluation of the peso. Would you trust the government with your hard earned money? Given the government issued savings Bond maturing in 2016 will earn 4% interest pa, compared to an annual inflation rate of 20%+ Me neither.
9 ChrisR (#) Jul 03rd, 2013 - 11:04 am Report abuse
“People will probably go running to exchange them for dollars as soon as they can so the effect on reserves will be ephemeral.”

This is nothing short of delusional if he thinks this is going to happen. 7.2 pesos cambio rate: in other words much the same as the Blue dollar.

No wonder Pistol Pete Moreno wanted the blue stopped in it's tracks and his statement that “you can make more money with the pesos” now makes sense.

Ah well! Another step to disaster and financial meltdown but it is amazing how The Dark Country keeps straggling one: must be in league with the Devil, oh I just remembered there is NO Devil!
10 reality check (#) Jul 03rd, 2013 - 11:22 am Report abuse
One thing is for certain, KFC & Co will not be setting an example by exchanging the $US they hold in their accounts, at home or anywhere else. Then again they don't have to, do they? they run the entire crazy place! One rule for them, one for the others and the others are happy to be shafted again and again and again.
11 yankeeboy (#) Jul 03rd, 2013 - 11:41 am Report abuse
Who predicted the return of Patacones? Who was it? Hmm

I hope they people buying these bonds know they'll never get U$ back.

My guess most of the people buying them are the narcos that are working for the Ks.
12 pgerman (#) Jul 03rd, 2013 - 12:07 pm Report abuse
@Mastershake

Let me correct you. Argentina is on “default” status since year 2002. The country left plenty of debts without being payed such as the debt with the Paris Clau or some pending bonds. So, technically, we cannot say that Argentina is going to declare another default.

In addition, as they never wanted to reach an agreement with the Paris Club or some bond holders the real magnitude of the international debt is imposible to be known. The figure informed by the Paris Club has never been recognized by the Argentine Government.

As I have already informed, the “real” Argentine reserves of the BCRA are not 40. billion dollars at all. The reserves, as any other one, are formed by assets. Some of these assest, bonds called LEBAC or NOBAC, “pases entre bancos”, etc, are useless to pay energy, to cancell old debts, to import raw material or to change pesos for dollars to small savers.

In the last “weekly official inform” of the BCRA you can see that the money (cash in dollars, I mean bank notes) are roughly 6 billion dollars. We could eventually add the mandatory reserve requirements (that is private money but can be change by unfriendly bonds) that are another 6 billion dollars.

So, CFK desperately needs cash money. That's the reason why she decided to launch this new bond. Let's see if she succeed.
13 ElaineB (#) Jul 03rd, 2013 - 12:47 pm Report abuse
A friend emailed from Buenos Aires yesterday. “What so you think of the Cedines?”, she asked. “We all think they are a load of shit. There is no way I am using that”. She also said the rumour in BsAs is that it will become the new currency.
14 Pete Bog (#) Jul 03rd, 2013 - 12:51 pm Report abuse
When is the official currency of Argentina to be renamed 'The Malvinas'?
15 reality check (#) Jul 03rd, 2013 - 01:01 pm Report abuse
How about splits?

As in banana splits!
16 manchesterlad (#) Jul 03rd, 2013 - 01:09 pm Report abuse
After 2 days still not one Cedin sold......what a surprise!

The problem is that each provincial government including Capital Federal has legal right to investigate the source of funds of each purchase even though CFK says they can be anonymous

This is why there is no great rush to buy the bonds since nobody wants to be the first to get caught

I imagine that after a few days CFK , Boudou, Baez, & the other corruptos will start laundering their own money to try & kick start the operation.....the only problem is the people are on to them already!!!
17 Vestige (#) Jul 03rd, 2013 - 01:46 pm Report abuse
$160 billion held by Argentines in bank accounts abroad.
Tax authorieties in place.
Reprieve offered.
Time ultimatum issued.
It will work.


page bookmarked
names taken
smugness on standby
18 yankeeboy (#) Jul 03rd, 2013 - 01:53 pm Report abuse
The U$160B is an estimate nobody really knows how much is held abroad and regardless of the amount, what is the reason people are holding it abroad?

Imminent devaluation
Fear of Confiscation

How does this bond answer either of those two issues?

Estimates are that the gov't will sell U$1.5B so how many tankers of LNG does this buy?
Enough to get to the elections

Then what?
19 bushpilot (#) Jul 03rd, 2013 - 02:19 pm Report abuse
“People will probably go running to exchange them for dollars as soon as they can“

Once, the Argentine Govt. obtains these U.S. dollars, why wouldn't they then restrict people from exchanging the Cedins to get $U.S. back, especially if they have already put 30 measures in place to hold on to $U.S.?

What does the term ”Cedin“ stand for?

If an entity has an obligation to me in $U.S., why would I accept an Argentine ”Cedin“ certificate in payment of that obligation? Am I legally compelled to accept it?

Why would I rather pay in ”Cedins” than in $U.S.?
20 reality check (#) Jul 03rd, 2013 - 02:19 pm Report abuse
Cor that's lucky they had a $160 billion stashed away for a rainy day! Problem solved.

Next thing you know their alchemists will be transmuting lead into gold, just you wait and see, shale oil? Pahh! who needs that?
21 ptolemy (#) Jul 03rd, 2013 - 02:37 pm Report abuse
I suspect the law is for “friends” of CFKs government,etc. You only need a clean background to bring money in,..the source of the funds is not questioned. That person can be anyone.
22 Conqueror (#) Jul 03rd, 2013 - 03:51 pm Report abuse
@17 Does that include CFK's ill-gotten gains?
@21 Does that mean more bulging suitcases?
23 mollymauk (#) Jul 03rd, 2013 - 04:28 pm Report abuse
@19 “What does the term ”Cedin“ stand for?” -
The answer is in the article - “CErtificate of Deposit for INvestment”
24 bushpilot (#) Jul 03rd, 2013 - 04:55 pm Report abuse
You are right. 6th paragraph

“to trade their dollars for a certificate of deposit for investment, or Cedin,”

Thank you.
25 nerosaxo (#) Jul 03rd, 2013 - 04:57 pm Report abuse
Good advertising slogan:

CEDINS FOR CRETINS

LMAO
26 Briton (#) Jul 03rd, 2013 - 05:47 pm Report abuse
Look,
If she and her government wants to fleece or steal from her own people,
That’s her problem,

If her people let her get away with it, its their problem
As long as it keeps her tiny corrupt mind of the Falklands,
then all is ok..
.
27 Steveu (#) Jul 03rd, 2013 - 06:48 pm Report abuse
State sponsored legalisation of Monopoly money as far as I can see!
28 reality check (#) Jul 03rd, 2013 - 07:09 pm Report abuse
Ask yourself this question. If you accumulated savings in a rock solid safe currency. Would you exchange it?
29 Troy Tempest (#) Jul 03rd, 2013 - 07:39 pm Report abuse
Cedins, are those recognised as a negotiable currency?

I thought they were NHL hockey players.
30 slattzzz (#) Jul 03rd, 2013 - 08:27 pm Report abuse
@16 can't THINK why mate
@26 quite agree mate
31 Vestige (#) Jul 03rd, 2013 - 09:04 pm Report abuse
mercopravda
32 Troy Tempest (#) Jul 03rd, 2013 - 09:44 pm Report abuse
Rosadapravda
33 yankeeboy (#) Jul 03rd, 2013 - 10:04 pm Report abuse
Can you imagine how messed up an economy is that the gov't must worry about the price of bread?

The currency crisis can not be held at bay for much longer.
34 Ayayay (#) Jul 04th, 2013 - 02:37 am Report abuse
why are CEdINs a thingagram in... ENGLISH?
35 mollymauk (#) Jul 04th, 2013 - 07:26 am Report abuse
@34 -
Because the Spanish for “CErtificate of Deposit for INvestment” is “CErtificado de Depósito para la INversión” (or something like that - sorry, this is just an online translation, my Spanish is not that good)
36 Fedaykin (#) Jul 04th, 2013 - 09:16 am Report abuse
So Vestige, how many of your dollars stashed away are you planning to exchange for Cedines? Considering the recent history of the Argentine economy any citizen seriously considering taking government bonds
37 zathras (#) Jul 04th, 2013 - 09:28 am Report abuse
I suspect this doesn't help the economic situation

www.bbc.co.uk/news/world-latin-america-23177336

Can anyone tell me how much foreign currency Argentinians are allowed to own with being forced to exchange it?
38 Mendoza Canadian (#) Jul 04th, 2013 - 11:11 am Report abuse
And so far they have sold a total of $160,000. WOW...
39 Fedaykin (#) Jul 04th, 2013 - 12:17 pm Report abuse
I think this article pretty much sums it up!
qz.com/99501/meet-argentinas-new-pseudo-currency-the-dollar-denominated-cedin/
The money launderers and black market dealers in dollars are not going to give up what they have. The average citizen would be crazy to give up their dollars for what is in effect a gamble on the Argentine economy with worthless piece of government paper! How many times have there government tried to get the dollars out of the Argentine economy? How many times have they failed? So Vestige are you going to give up your dollars for this new wonder currency? I somehow doubt it.... So please do record my name as it is highly unlikely you will have anything to smugly crow about in the future! Look it is simple pay your debts as a nation! Then the international money market might actually trust you! Stop nationalising all your industries and then shoving La Campora appointees who haven't got the first clue about running them!
40 yankeeboy (#) Jul 04th, 2013 - 12:33 pm Report abuse
I would bet Crissy is a bit nervous over the price spike in oil.

They've already spent 99% of 2013 budget for fuel/fuel subsidies.

I am very surprised in the rapid depreciation of the gov't rate too! By next week it will be 5.5/1.

As I mentioned awhile ago, forced sale of grains or face confiscation.
Next it will be expropriation of underperforming farms

I wonder if Toby and Think will be working on one of the Farm collectives”? I know Yul is ecstatic. One more step to the gov't controlling everything.
41 slattzzz (#) Jul 04th, 2013 - 10:20 pm Report abuse
@36 & 39 why would vestige worry he don't live there
42 The Truth PaTroll (#) Jul 05th, 2013 - 01:14 am Report abuse
Rather interesting to note how so many here blast Argentina's government for seeking to control the currency of it's population, while simultaneously praising their own government's actual control of their phone calls, emails, courrier, internet habits, broadcasts, and even driving habits if available.

Of course one will never get an explanation from the participants of this forum elucidating why one type of big brother (currency control) renders Argentina's government so “undignified and tinpot”, but another type of big brother, that of their own governments, does not render their governments as banana despots undermining the rights of their subjects.
43 Troy Tempest (#) Jul 05th, 2013 - 02:50 am Report abuse
@tedious Toby troll

“ their own government's actual control of their phone calls, emails, courrier, internet habits, broadcasts, and even driving habits if available.”

Toby

“Control”? Ha ha ha , I don't think so, feeb!
Do you mean like “control” of your lives ??
CFK controls your Judiciary, the Press , your possession of US dollars, and restricts your travel outside of Argentina, while dictating that the Middle Class MUST hire the poor or be taxed etc, etc. etc.
44 The Truth PaTroll (#) Jul 05th, 2013 - 02:57 am Report abuse
So you refuse to answer the point raised. Why is wealth control more despotic than control of how much privacy you are entitled to?

If you were truly honest about being a liberalist republican, you would admit both at least are equally indicative of a decadent government.

You see there is no difference. In order to survive, Argentina's government needs to control the wealth of its citizens. In order to survive , your governments are in need to control information.
45 reality check (#) Jul 05th, 2013 - 05:28 am Report abuse
Listening in on communications, is not controlling them or did I miss something here?
46 Troy Tempest (#) Jul 05th, 2013 - 05:47 am Report abuse
Tedious

“If you were truly honest about being a liberalist republican, you would admit both at least are equally indicative of a decadent government. ”

Please do not tell me to defend myself as your definition of a “republican” or a “liberalist”, you don't know hat I am either one, and I don't know what you are implying.

“...indicative of a decadent government” - thanks for that, at least you are admitting that your government is “decadent”. :-)

“You see there is no difference. In order to survive, Argentina's government needs to control the wealth of its citizens. In order to survive , your governments are in need to control information.”

Toby Tedium,
You are only trying to divert the discussion.
This article is about the desperate measures your government is going to, in order to survive and stay in power.
Interestingly, there is a strong undercurrent of irony to this article. That is the real story, here.
The country is trying to survive, but it really needs protection from itself.
The government is the country's own worst enemy - it needs to control the 'wealth' of the citizens, and extract even more wealth of the citizens to shore up the financial reserves, a problem CFK's government created by 'Nationalising' key industries, corruption at the highest levels, non-payment of debts leading to the destruction of credit and foreign investments.
The people will be bled dry, forced to trade their foreign currency for worthless notes.
Shortly afterwards, the economy will implode.
But, CFK and pals will survive - comfortably well - off.
47 The Truth PaTroll (#) Jul 05th, 2013 - 06:08 am Report abuse
Oh don't worry, I will no longer air out the dirty laundry of your country just because you have no courage to admit your country ever does wrong or maybe down the wrong path. I am past that now.

You can call my country whatever you wish, listening to your privacy is a form of control whether you care to admit it here or not and everyone would agree that if I know what you talk and write about privately, I have power over you by having information about you to either coerce you, defeat you in argument by the element of surprise, or other. Your name calling is also childish, but I'll leave that up to you.

There are several doughnut holes to this story, lets remember that if articles as read in Mercopress three years ago were so accurate, then the country would have indeed collapse back in 2010. Yet...
48 RICO (#) Jul 05th, 2013 - 07:31 am Report abuse
“Unfortunately for me and for most Argentines, I don’t have a little machine that makes dollars,” she said in a November speech in Buenos Aires.

Have we checked, she is not the most honest person.
49 yankeeboy (#) Jul 05th, 2013 - 10:04 am Report abuse
Well Moreno is going to confiscate the Wheat the farmers claim not to have. This should be interesting to watch.
Can you imagine!
Wheat!
Bahahahaa
I told you this would happen last year.

Next it will be the “unproductive” farms
50 Troy Tempest (#) Jul 05th, 2013 - 12:51 pm Report abuse
47

and Toby backs down - no argument.

:-D
51 ChrisR (#) Jul 05th, 2013 - 01:48 pm Report abuse
49 yankeeboy
“Next it will be the “unproductive” farms”

I think that is already to roll, Pistol Pete Moreno is just waiting to see the reaction by the Farmer's Union.
52 yankeeboy (#) Jul 05th, 2013 - 02:06 pm Report abuse
The farmers have not played this well. They need to stop all deliveries of all food products until the gov't meets their demands. Let BA starve and the people revolt.
I can't understand why they're not playing that card yet.
53 axel arg (#) Jul 06th, 2013 - 11:03 pm Report abuse
BAD FAITH=MEDIOCRE ANALYSIS.
Beyond the fact that detractors will always be necesary for any politic project, due to everybody have different ideas, and they have right to deffend them, beside, some of the critics made by detractors are relevant, however, being a detractor, don't justify the tipicall hypocrite and too partial analysis that are usually published in the press about argentina's situation.
Although i have said in different oportunities that mercopress is a serious website, if it's compared to clarin, la nación, or perfil, which are shamefully pathetic, however, in my opinion in many oportunities mercopress's headlines or some of it's reports, often ridicule c. f. k's words, or publish analysis which are too partial.
Inflation in argentina is an issue which is published all the time, not just in mercopress, but in many newspapers too, but what most them don't say, is what is the true origin of inflation, they just make too superfitial analysis.
I have explained in this forum in different oportunities the true reasons of inflation in the country, and i also said why it will take many years to solve it.
The speculation with dollars, is a remora that we have since the last dictatorship, when martinez de hoz eliminated all the restrictions for the acquisition of foreing currencies, in 1977 and sold the monetary sovereignty, he did it because neather him, nor all the rest of the criminals who ruled argentina in that moment wanted and industrial nation, they just wanted an economy based on financial services, which was convenient to all the richest sectors of the society which had supported the last coup d'etat.
Cristina is making now what all the rest of the governments should have done many years ago, in order dismantle all the remoras that we still have of neoliberalism, and continue with an industial project, which is actually what argentina needs. Anyway, there is a lot more to say about all this problematic.
54 Troy Tempest (#) Jul 07th, 2013 - 03:10 am Report abuse
CFK has pocketed all the money earmarked for replacing infrastructure, and 'taxed' the middle class and Investors, domestic and foreign, until industries are no longer viable.
She has robbed the Pensions of ordinary Argentinians, supposedly to pay National Debt., which she has reneged on.

Where's the money gone??
55 yankeeboy (#) Jul 07th, 2013 - 12:52 pm Report abuse
Axel, I've said this before, you clearly have no concept of how an economy works.
It is sad and you are one of the reasons your county has a currency crisis every 10 years.
I hope you've been taking my advice and stocked up on tradable commodities over the last year.
You are going to need them very soon to survive.

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