Argentinians Are Now Poorer Than Citizens Of Equatorial Guinea After Massive Devaluation

Tyler Durden's picture

On Wednesday evening, Argentina’s FinMin (and former head of global FX research at JP Morgan) Alfonso Prat-Gay abolished currency controls, fulfilling new President Mauricio Macri’s promise to unify the official and black market peso rates.

The move came on the heels of central bank governor Alejandro Vanoli's forced resignation. Macri has accused Vanoli of endangering the country's finances by racking up some $17 billion in dollar futures which the new government attempted to renegotiate ahead of the deval.

“For those interested in a case study of what happens after a dramatic devaluation, you now have front row seats for what is likely to be a 25-30% peso plunge,” we said two days ago. Yesterday, the peso did indeed take a nosedive as the parallel rates converged on 14 ARS/USD. 

What does this mean for Argentinians, you ask?

Well, as FT reports, “Argentines woke up on Thursday richer than Poles, Chileans and Hungarians [but] by bedtime they were not only poorer than all three, but also more pecunious than Mexicans, Costa Ricans and the good people of Equatorial Guinea.”

In dollar terms, the sharp peso plunge pushed the country down eleven slots on the list of richest nations in GDP per capita terms. As the following table shows, Argentineans are now worse off than citizens of Chile, Poland, Equatorial Guinea, Hungary, Lebanon, Panama, Croatia, Kazakhstan, Costa Rica, Malaysia, and Mexico.

More generally, the devaluation will cost the country some $167 billion in GDP. "[This is] just the latest ignominy to hit the seemingly accident-prone nation, which just over a century ago was the seventh-wealthiest country in the world on a per capita basis, ahead of the likes of Denmark, Canada and the Netherlands and five times wealthier than Brazil," FT goes on to say.

While the devaluation is likely the right move from a long-term perspective, in the short-run things will be painful. “The peso devaluation is a bitter pill for Argentinian households who kept their savings in pesos and for multinationals who had reported peso cash balances at the official exchange rate on financial disclosures,” Bill Adams, senior international economist at PNC Financial Services Group says.

And with that, we'll close with a few passages from one of the world's greatest economic minds. This is from May 3, 2012: 

"...press coverage of Argentina is another one of those examples of how conventional wisdom can apparently make it impossible to get basic facts right.

 

Articles about Argentina are almost always very negative in tone — they’re irresponsible, they’re renationalizing some industries, they talk populist, so they must be going very badly. 

 

Matt Yglesias, who just spent time in Argentina, writes about the lessons of that country’s recovery following its exit from the one-peso-one-dollar 'convertibility law'. As he says, it’s a remarkable success story, one that arguably holds lessons for the euro zone."

 

 

 

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
falak pema's picture

well they can only move up now.

JungleCat's picture

Methinks you are using old numbers for Equatorial Guinea.

They're an oil country, so they've moved down the list, too.

Looney's picture

I have an 0bamaCare question.

Does testing positive for gonorrhea have anything to do with Argentina’s elections, the Fed’s raising rates, or looking at the "10-Girl"? ;-)

Looney

clooney_art's picture

All Latin American countries are dirt poor. They live on borrowed money.  Heck I would be rich if I maxed out on my credit card, but only for a short while.

Save_America1st's picture

I bet she can get that in her mouth...that trophy looks like it's headin' for some lovin'....

someone had to say it ;-)

J S Bach's picture

Somebody slip some cyanide crystals into Krugman's drinkypoo.

eforce's picture

It's all Britain's fault! Muh Falklands...

Antifaschistische's picture

for about the 40th time in the last 12 years...in countries around the world we can repeat.

"I guess you should have bought gold"

Mat Cendana's picture

Okay, that's it - I'm going to do just that this Monday. Will plonk down a third of my intended budget, regardless of what the gold price is or the exchange rate (am in Malaysia). The share markets don't look too solid right now. Might rebound, or might not. Either way it wouldn't hurt to have some insurance in the form of gold (and silver).

Antifaschistische's picture

just do it and don't look back.  It's insurance.  If the price goes down..buy more, if it goes up, buy less...but keep buying at regular intervals.

Theosebes Goodfellow's picture

Huzzah for Macri and the people of Argentina! It takes real courage to do what Macri has done. He did it because not doing so would have been what the Fed is doing. The guilt for this is at former señora presidente Fernadez de Kirchner's feet. Someone ought to lampost that bitch. I just wish we in America had the balls to put in order our own economic house.

Freddie's picture

Sadly for the Argentines, the real trophy went to Germany.  Argentina played Germany much closer as BRazil was destroyed in the semi finals.

Argentina is tragic.  They have every resource in the world except honesty.   They are totally corrupt like the USA and the EU-SSR. 

Argentian was once (around WW2) the 9th or so wealthiest country in the world.

DriveByLurker's picture

"Argentina" comes from the latin "Argentum", silver.  Literally, "Argentina" means "Silver-land".

From the late 1800s until about WW1, the phrase "rich as an Argentine" was common in many European languages.

August's picture

>>>Argentina is tragic.  They have every resource in the world except honesty.

A few years ago, I was visiting Argentina when former president Raul Alfonsin died.  It was treated as a very big event, with extensive press coverage; at least one broadcaster openly referred to Alfonsin as "the only honest president Argentina ever had".

All presidents, and people, have their feet of clay, but I can't think of any US president since the ascent of LBJ who struck me as being honest. It's all marketing now, not integrity.

ATM's picture

no wonder he's dead.

JonNadler's picture

speaking of the final, the gaol Higuain missed is almost a metaphor for the whole country, you're in front of the goaly, you're one of the best goal scorers in the world and you shoot it wide.  To mess up a country so rich takes talent

https://www.youtube.com/watch?v=hHbQIveDjyU

 

poor guy

 

Id fight Gandhi's picture

"She take my money... When I'm in need..."

Stuck on Zero's picture

If Argentinians are spending most of their money on locally produced goods then their standard of living has not gone down much with devaluation. If, like the farmers, they are producing for export they have suddenly gotten a lot richer.

EBT excepted's picture

yeah, bruthah...we be callin' dat nigrow rich, but y'all ca spell nigrow howevah ya'all like...

 

nigrow rich, peepses...hunned dollah beel n' a gold toof...

junction's picture

Macri's move may backfire, especially if Argentinians find out Macri has dollar funds stashed in a Cayman Island account.

Mat Cendana's picture

It may not be Cayman but the essence is most likely true. Actually he and those with the means would be foolish not to protect their money from various government rules and regulations. Well, now he is "the government". Just hope he doesn't abuse the position to add to that Cayman or wherever account with ill-gotten money.

Hohum's picture

Equatorial Guinea's wealth is tied up in one man, so a little misleading.

RichardParker's picture

Equatorial Guinea is home to Africa's longest-ruling dictator, Teodoro Obiang Nguema, who seized power in a military coup by executing his uncle 33 years ago...

http://www.wsj.com/articles/SB10000872396390443687504577565451822103204

HenryHall's picture

Not much sympathy. They voted for that new president, they should have known what was coming as a consequence.

GhostOfDiogenes's picture
GhostOfDiogenes (not verified) HenryHall Dec 18, 2015 7:21 PM

He didn't do it.

The former Kirchner dictatorship did it, and burnt up the evidence before leaving office.

Soul Glow's picture

The Kirchers were the Clintons of the South; horribly corrupt people.

Soul Glow's picture

For those that spent their pesos on fake boobs, good investment.

Fake boobs > pesos

Never One Roach's picture

Those who bought a bag of gold pesos are sitting pretty.

Save_America1st's picture

the thing about phyzz for pretty much every other country on the planet in terms of fiat is that all of them are at records or near record prices.  Their people can hardly afford phyzz in their own worthless fiat.

So take advantage right now in here in the U.S. folks...because of the dollar, we're pretty being given the phyzz on silver and gold platters!  Pun intended.  Start or continue to buy phyzz like it's going outta style.  Because the dollar will be the last to go down the toilet and so you better have a nice stack after the SHTF. 

Everyone in these other countries can't hardly buy toilet paper much less an ounce of gold or a 20 roll of silver.  We're getting the stuff easily right now and with regular premium prices for dirt fucking cheap!

John Williams at Shadow Stats crunched the numbers recently, and the price of silver right now compared to the 1980 all-time high adjusted for inflation and the amount of dollars in print today would put silver at around 1.50 an ounce in 1980.  That means silver today should actually be valued at around 600 bucks an ounce.

They're giving it away and silver is being destroyed and becoming more and more scarce due to the industrial destruction and the high cost of mining and refining.  Output is dropping and mines are going to stop bring the stuff to market due to cost.

The GSR is currently around 75:1!!!  That's insane when it should actually be around 15:1 or so.  Silver is the buy of the century...of a lifetime right now!

Keep stacking heavy and you'll never regret it. 

Mat Cendana's picture

Gold and silver are still within reasonable prices, even in countries that have seen depreciation against the dollar. I'm in Malaysia where the ringgit has taken a battering over the past 12 months especially. I've bought some silver bars and coins a couple of years ago when it was at $21. It may have gone down in dollar but in the local currency I'm still getting the same amount.

 

The gold-silver ratio shows abnormality. Yes, this is a great time to buy silver, especially with dollars. And with other currencies too. Wouldn't be a bad idea to put our savings in physical precious metals. Just make sure they are safely stored.

We don't know what the future holds, what the prices will be. They may go down, which isn't impossible. However, I doubt we will end up being worse for having physical gold and silver.

 

Thanks for your comment above. It has nudged me into buying more bars and coins.

 

 

Id fight Gandhi's picture

 

Going rate for a street whore in Greece is €2-5, or a "cheese sandwich" [sic].

She better be bi.. Lingual and GTFO outta there. Get a sugah daddy.

 

Maybe the pope Franky will throw some dough at his home country after he's done ignoring all the scandals and chasing climate change.

 

In other words theyre f#cked. And I don't mean proper f#cked.

 

 

Burticus's picture

The saying is "flocked without getting kissed."  Time for the sheeple to wake the flock up.

zvzzt's picture

Fake boobs filled with gold, an even better investment. They will probably hang 'a bit' though and running is going to be difficult

Itchy and Scratchy's picture

Viva La Socialista Revolucione! 

GRDguy's picture

Sudden changes in any currency is simply, no more and no less, a gigantic robbery.  The financial sociopaths know this, but without conscience nor empathy, they go right ahead and do it anyway.  That's why I've started using the name "Satan's Angels."  Maybe folks will get it this time.

Proctologist's picture

I prefer to call it " thinking from the pit of hell".

Take the angel right out of it...

Itchy and Scratchy's picture

It's never sudden. At first it happens slowly and then it happens all at once! (minor distinction)

fiftybagger's picture

There was nothing sudden about it.  It's just the new government admitting the true value of the currency, which the black market knew all along.  Just look at Nick the bus driver's currency down in Venezuela:

 

Official rate - 6.5 Bolivar to the dollar

Black market rate - 865 Bolivar to the dollar

Oldrepublic's picture

Argentina has a very high human development index of around 40,

in contrast to Equatorial Guinea's 138, almost the bottom of world

 

Soul Glow's picture

40 and falling....

The value of a currency means everything for standard of living; just look at the US.

Flying Wombat's picture

115 years ago, Argentina was one of the richest countries in the world.  There used to be an old saying:  "Rich as an Argentinian."

If there was a fine example of how to screw up an economy, Argentina certainly qualifies. 

GRDguy's picture

The Argentines never had a chance, once they were targeted by the financial sociopaths from the City of London Corporation.

Just like what happened to the United States.

Nexus789's picture

You screwed up your own country nimrod so grow some and accept responsibility. Only a group of half enlightened half wits could go from being the dominant technological power on earth after WW2 to becoming the most indebted while simultanioulsy fueling the rise of the next superpower. 

The development failure of South America can be laid at the feet of the US. After the US Monroe Doctrine all European investment left S America and of course the US never bothered to invest. 

Nexus789's picture

Argentina's economy was growing via UK and European investment. The Monroe Doctrine endded this and South America went backwards. More like a US strategy to stifle economic development and political independence in South America.

grunk's picture

Debt slavery was the

Gooooooal!!!!!!!!!!!!!!!!
ZombieHuntclub's picture

Meh, once a shit hole, always a shit hole. 

Midas's picture

Not sure what you are getting at, but hopefully you are not calling Argentina a shit hole.  I have spent some time there and indeed, the ecomony sucks, but it ain't no shit hole. 

Itchy and Scratchy's picture

I think he's thinking Armenia!