Our Argentine “Ranch Rebellion” Is Over… for Now…

BUENOS AIRES, Argentina – Not much action on Wall Street yesterday. The Dow sold off slightly. Gold and oil were up a bit. How about here in Argentina?

“Everything has changed. Everything.”

 

macriMauricio Macri shortly after his election – indicating that he actually has a plan.

Photo credit: Enrique Marcarian / Reuters

 

One of the analysts in our Buenos Aires office explained how the recent election of business mogul Mauricio Macri as president was an even bigger deal than we thought.

“Two parties have ruled Argentina for the last 100 years. The Peronists… and the Radicals. They both had the same agenda more or less – more government control of the economy. The only question was which cronies would benefit.

“But Macri is with neither party. That is an astonishing break with the past. But it goes beyond that. He’s also a rich businessman. This is unheard of in Argentina. Businessmen are the enemy here. Now, we have one at the head of the government.

“It’s a miracle he got elected. He’s much better than anyone running for office in the U.S. We’re lucky to have him.”

 

1-USDARS(Weekly)The Argentine peso is beginning to stabilize. For the first time since the 2001 default and de-pegging from the US dollar the exchange rate is no longer a one-way street.

 

Already, we have heard rumors of the profound change coming from our ranch. Our local rebels – who had been backed by the former president, left-wing populist Cristina Kirchner – are becoming more reasonable. [Catch up here on last year’s “Revolution on the Ranch.”]

Kirchner sponsored “indigenous” groups in the hope of gaining more support for her troubled government. These groups paid organizers and activists – including at least one, apparently, on our ranch – to preach insurrection.

“Fiestas” (parties) were held – at taxpayer expense – in which the local people were encouraged to break the law by seizing our land. They were told that they had a claim that went above and beyond settled principles of property law: simply because ancestors had come from the area (which may or may not have been true).

But everything has changed in the last few weeks. A group of these “originarios” invaded two of the ranches near us. Normally, the police would not have intervened. And the owner would have to agree to give them money… or land… to buy them off. But now it is different.

Instead of allowing the originarios to shake down the owners, the police arrived, arrested the leaders, and drove the rest of them off the property. According to our sources, the ringleaders are still in jail. All of a sudden, the families up in the mountains  are starting to show some respect… or at least some apprehension.

 

2-dolar bluThis short term chart of the “dolar blu” black market exchange rate compared to the official rate shows that the two are recently converging – needless to say, this is a very good sign. For the first time in a long time we’d actually consider the peso a potential “buy” – click to enlarge.

 

“You Won’t Believe This…”

“You won’t believe this,” began a message from our ranch manager, “but (the three rebel families that live up in the mountains of our ranch) came to me and offered to pay their rent.

“They haven’t even allowed us to count their animals in years (they are supposed to pay us 7% of their herds annually).

“Now, they want us to count… and they’re willing to pay. This is a big shift. I think our problems with the local people may be over. At least for now.”

“At least for now” may not last long. A friend in Buenos Aires warned: “The Cristina government laid landmines all over the place. Some of them are bound to blow up. It is not at all clear that Macri will survive.

 

KIRCHNER_2714924bChristina Kirchner: layer of landmines. We’re not so sure Argentina’s citizens would want to return to her failed economic model, even if correcting her mistakes involves short term economic pain. They can see what has happened in Venezuela – no-one can possibly want to live in such a hell-hole.

Photo credit: Getty Images

 

“Just last week, he raised electricity bills some 400%. Power is still ridiculously cheap. I pay just $3.75 a month for electricity in my apartment… and it’s all electric. I keep thinking that they made a mistake in calculating it. But it just shows the wacky results of controlling prices for such a long time – you don’t know what anything should cost.

“Of course, the government has to raise prices. There’s been no new investment in power production for the last 12 years. That’s why we have blackouts in the summer. It’s like a Third World country here.

“Inflation is already rising. And it will probably go up a lot more. For example, the government has eased the restrictions on food exports. They had to do it. You can’t run a country by cutting off its main source of export income. But in the short run, it will mean higher food prices.”

 

Making Enemies

“Macri may have moved too far, too fast,” continued our friend.

“He’s making enemies. That was bound to happen… but he can’t afford to make too many.

“He fired about 25,000 ‘gnocchi’ – you know, people on the government payroll who never come to work. They don’t even have desks or pretend to work. They just go into the office on the 29th of the month to get their checks (traditionally, Argentines eat gnocchi on the 29th… hence the moniker).

 

gnocchiGnocchi! Yum-yum… let us go on the record here that we disagree with Bill’s friend. We don’t think that former Kirchner business cronies and the 25,000 “gnocchi” which every normal Argentine surely thinks got what was coming to them will be able to muster sustained street protests or serious pressure against Mr. Macri. We could be wrong, but we think it is way too early in the game for that. Yes, they are desperate – with good reason – and they shall remain so for a while yet.

Photo credit: juleslev-blog.tumblr.com

 

“Macri has even fallen out with big business. You’d think he’d have the business community solidly behind him. But many of them did their deals with the Kirchners. They paid their bribes. They got their crony contracts.

“They don’t want to lose the privileges they paid for. So, now the media is reporting that many of the movers and shakers in the private sector are against him, too.

“They’re all looking for some way to bring the president down. The latest thing is the scandal over those accounts in Panama. His father set up an account there… years ago…even before Macri entered politics. He was a signatory on the account, which had no money in it. And Macri never made any money from it.

“I mean, it’s not a story at all. But they’re desperate to get something on him. Remember, this is Argentina. Anything can happen. I think we’re going to see some big strikes, street demonstrations…and maybe riots too…soon.”

 

Charts by: investing.com, HighCharts

 

Image and chart annotations by PT

 

The above article originally appeared as “Our Argentine “Ranch Rebellion” Is Over… for Now…at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.

 

 

 

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