Margin Rate definition and meaning - Define Margin Rate

Análisis The Walt Disney Company (NYSE:DIS)

Hola! Hace un par de semanas compartí una breve investigación que había hecho sobre American Airlines (NASDAQ:AAL) que fue relativamente bien recibida. Ahora comparto esta que hice sobre Disney (NYSE:DIS), quizás a alguien le sirva. Por supuesto recibo criticas, sugerencias, puteadas, etc.
-Link análisis AAL: https://www.reddit.com/merval/comments/i7eh5d/an%C3%A1lisis_american_airlines_nasdaqaal/

The Walt Disney Company (DIS)

The Walt Disney Company (NYSE:DIS) es una compañía multinacional estadounidense dedicada principalmente a los medios de comunicación masivos y a la industria del entretenimiento. Su sede está en Burbank, California, EEUU. La compañía cotiza bajo el ticker DIS, en Nueva York, a un precio de US$ 127,44 al 23/8/2020. Goza de un tamaño prominente, teniendo 223 mil empleados y una capitalización de mercado de 230.292M de dólares. Disney integra el índice Dow Jones Industrial Average (DJIA) desde 1991, y también integra el S&P 100 y el S&P 500.
Evaluando más en detalle el desempeño de la acción, la acción cotiza US$ 127,44 al 23/8/2020. Hace aproximadamente un año, el 26/8/2019 la acción cotizaba a US$ 137,26 lo que representa una caída aproximada del 7,15% anual (TTM). La caída es mas pronunciada YTD, Disney cotizaba US$ 148,2 a principios de año, por lo que al día de hoy la caída seria del 14%. No obstante, la acción a recuperado bastante valor después de la caída pronunciada que sufrió en Febrero-Marzo, llegando a cerrar a US$ 85,76 el 23/3/20 (habiendo subido un 48% desde entonces). Es para destacar que desde dicha caída se vio un significativo incremento en el volumen operado del papel. Mirando brevemente las medias móviles, vemos que la cotización actual esta por encima del promedio de 30 días (US$ 122,73), del de 90 días (US$ 115,98) y de 200 días (US$ 124,12). Con respecto al mercado, al 25/8, desde comienzo de año Disney se desempeñó por debajo del S&P 500 (5,7%), y del DJIA (-2,15%), con desempeño de -12,42% YTD.[1]
La compañía fue fundada en 1923 por los hermanos Walt y Roy Disney. A lo largo de su historia, Disney se consolidó como líder en la industria de animación estadounidense y luego diversificó sus negocios dedicándose a la producción de películas live-action, televisión y parques temáticos. A partir de 1980 Disney creo y adquirió diversas divisiones corporativas, para penetrar en mercados que fueran mas allá de sus marcas insignia orientadas a productos familiares.
Disney es conocida por su división de estudios cinematográficos (The Walt Disney Studios), que incluye Walt Disney Pictures, Walt Disney Animation Studios, Pixar, Marvel Studios, Lucasfilm, 20th Century Studios, Searchlight Pictures y Blue Sky Studios. Otras unidades y segmentos de la compañía son Disney Media Networks; Disney Parks, Experiences and Products y Walt Disney Direct-to-Consumer & International. A través de estas unidades, Disney posee y opera canales de televisión como ABC, Disney Channel, ESPN, Freeform, FX y National Geographic, así como también venta de publicidad, merchandising y música. También tiene divisiones de producción teatral (Disney Theatrical Group) y posee un grupo de 14 parques temáticos alrededor del mundo.
Es evidente la complejidad de las operaciones de Disney, por lo que vale la pena ir un poco mas a fondo en la composición de los segmentos operativos de Disney, en base al reporte anual de 2019 (mas representativo que el ultimo reporte trimestral en medio de la pandemia), donde encontramos cuatro segmentos relevantes. El primer segmento, denominado “Media Networks”, compuesto principalmente por los canales domésticos de TV, este segmento generó 24.827M US$ de ingresos en 2019 (un 34,7% del total). El segundo segmento es el de “Parks, Experiences and Products”, compuesto por los parques temáticos, resorts y cruceros de las compañías, así como también de las licencias de los nombres, personajes y marcas de la compañía y de los productos de merchandising propios, este segmento reportó 26.225M US$ de ingresos en 2019 (un 36,66% del total, el segmento mas relevante de la compañía). El tercer segmento, es el de “Studio Entertainment” que contiene las operaciones de producción de películas, música y obras de teatro, así como también los servicios de post-produccion. Este segmento reportó 11.127M US$ (un 15,55% del total). El ultimo segmento, quizás el mas interesante es “Direct-to-Consumer & International”, donde además de contener las operaciones internacionales de TV y servicios de distribución de contenido digital como apps y paginas web, se incluyen las unidades de servicios de streaming de Disney, compuestas principalmente por Hulu, ESPN+ y Disney+. Este sector reporto ingresos por 9.349M US$ (un 13,07%, enorme incremento respecto del 5,6% que reportó en 2018).
Respecto a la distribución territorial de las operaciones, es notorio el bagaje del mercado doméstico (EEUU y Canadá) donde concentraron en 2019 el 72,6% de las operaciones. Vale destacar también que hubo un incremento significativo interanual de las operaciones en los mercados de Asia-Pacífico (del 9,3% al 11,2%) y en Latinoamérica y otros mercados (del 3,09% al 4,61%).
En lo que respecta a la política de dividendos de la compañía, encontré registros de pago constante de dividendos desde al menos 1989. El ultimo dividendo fue el 13/12, habiendo pagado $0,88 y arrojando un dividend yield anual de 1,2%. La compañía decidió omitir el dividendo semestral correspondiente al primer semestre de 2020 por la pandemia del COVID-19.[2]
Evaluando un poco la posición financiera de la empresa, a junio de 2020, según el balance presentado, Disney tenia activos corrientes por 41.330M US$ y pasivos corrientes por 30.917M US$, lo que resulta en un working capital (activos corrientes netos, activos corrientes menos pasivos corrientes) de 10.413 US$. El working capital entonces representa el 33,68% de los pasivos corrientes (Con lo cual, el current ratio es de 1,34 apreciándose una mejoría respecto del 0,9 reportado en septiembre 2019). En relación con la deuda de largo plazo, la podemos estimar en 70.052M US$ (borrowings + other long-term liabilities), dado que en septiembre 2019 la cifra era de 51.889M US$, vemos que sufrió un aumento considerable (en el orden del 35%).
Respecto a los flujos de efectivo de Disney, vemos que en lo que va del año fiscal (septiembre 2019-junio 2020) Disney reportó flujo de efectivo por operaciones por 5949M US$, casi lo mismo que reportó para todo el año fiscal 2019 (5984M US$). Viendo la evolución de 10 años del CF de operaciones:

Año (sept-sept) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
CF de operaciones (mill. USD) 6578 6994 7966 9452 9780 11385 13136 12343 14295 5984
Dif. Anual % 6,32 13,9 18,65 3,47 16,41 15,38 -6,04 15,81 -58,14
Viendo la evolución en 10 años del flujo de efectivo de operaciones, vemos que en 2019 hubo una drástica reversión de la tendencia al alza que se venia reportando (con un 58,14% de caída interanual). Esto se debe en parte a la política de adquisiciones de la empresa, que vemos reflejado en el flujo de efectivo por inversiones, equivalente en 2019 a -15.096M US$ (muy por encima del promedio de 2010-2018, equivalente a -4179,4M US$).
En lo relativo a las ganancias de la compañía, para el Q2 2020[3] Disney reportó pérdidas por 4721M US$ (contra una ganancia de 1760M US$ para el Q2 2019). La situación se atenúa considerando las cifras para los últimos nueve meses (Q4 2019-Q2 2020), donde Disney totalizó perdidas por 1813M US$. No obstante, la situación del COVID-19 distorsiona nuestro análisis a largo plazo, por lo que para analizar la evolución interanual desde los últimos 10 años, utilizare los datos de los reportes anuales (datando el ultimo de septiembre 2019).

Año (sept-sept) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Net Income (mill. USD) 3963 4807 5682 6136 7501 8382 9391 8980 12598 11054
Dif. Anual % 21,3 18,2 7,99 22,25 11,75 12,04 -4,38 40,29 -12,26
Como se puede ver en el cuadro, pese al revés sufrido por las obvias complicaciones de la pandemia, el historial de ganancias de Disney es sólido. La compañía tuvo en los últimos 10 años, 2 años de contracción en las ganancias (2017 y 2019), pero en términos generales, las ganancias crecieron a una tasa promedio del 13,02% los últimos 10 años. Para evaluar el crecimiento general estos 10 años, si tomamos el promedio de los primeros 3 años (2010-2012) y el promedio de los últimos 3 (2017-2019), las ganancias de Disney crecieron un 125,8%.
Mirando un poco de ratios, analizaré el EPS (Earnings Per Share) de la acción. Para el Q2 2020, Disney presentó un EPS negativo, de -2,61, contra un 0,98 obtenido en el Q2 2019. Refiriéndonos al desempeño pre-pandemia, el EPS promedio anual de los últimos 5 años fue de 6,3 y el ultimo EPS anual reportado (septiembre 2019) estaba ligeramente por encima, alrededor de 6,68.[4] En lo respectivo al Price/Earning, el P/E (TTM) al valor de la acción del 23/8 es de -208,9. No obstante, si eliminamos la distorsión producto de la pandemia, calculando las ganancias promedio de los últimos 3 años (de acuerdo con los reportes anuales), es de 18,38, lo cual es un valor aceptable dada la coyuntura de los últimos años. En lo que respecta al Price-To-Book (P/B) ratio, el book value a junio 2020, es de 50, por lo que el P/B (siempre al precio del 23/8) es de 2,54, un valor razonable dados los promedios de los sectores en los que Disney tiene incidencia.[5] El ultimo ratio a analizar es Price/Assets (P/E*P/B) que, (usando P/E con promedio de las ganancias de los últimos 3 años) arroja un valor de 46,68.
Sobre el soporte institucional de la compañía, Disney tiene un apoyo considerable, calculado en el 66,42% del flotante en manos de instituciones. Los tenedores líderes son Vanguard con el 8,22%; BlackRock (NYSE:BLK) con el 6,32% y State Street Corporation (NYSE:STT) con el 4,19%. Otros tenedores significantes (1-2%) son Bank of America (NYSE:BAC), MorganStanley (NYSE:MS) y Bank of New York Mellon (NYSE:BK).[6]
En lo respectivo al management de Disney, la primera consideración importante es respecto al legendario CEO de la compañía, Robert “Bob” Iger, quien, en febrero de este año, después de posponerlo por años, decidió dar un paso al costado como CEO de la compañía, dejando a cargo al director del segmento de Parques y Resorts, Bob Chapek. Esto duró poco, y en abril Iger volvió a tomar las riendas de la compañía.[7] No obstante, es altamente probable que, una vez estabilizado el panorama Iger retome su frustrado plan de dar un paso al costado.[8] En lo relativo a la compensación, Iger cobró 47.525.560 US$, los executive officers una remuneración promedio de 11.319.422 US$ y el empleado promedio de Disney cobró 52.184 US$.[9]
Una cosa que llama la atención del balance de Disney (septiembre 2019), es el incremento notorio del goodwill (de 31.269M US$ a 80.293M US$, un aumento del 157%). No obstante, este incremento puede deberse a la política de fusiones y adquisiciones de la compañía. Disney viene llevando en los últimos años una política de adquisiciones relativamente agresiva, ideada por el CEO Bob Iger, de las cuales podemos destacar 4 o 5 operaciones clave, la primera de ellas fue la adquisición de Pixar, la famosa empresa de animación que había despegado bajo la conducción de Steve Jobs y Ed Catmull, en 2006 por 7,4MM US$ (de esa adquisición se beneficiaron sacando películas muy exitosas como Up, Wall-E, Ratatouille, Toy Story 3, etc.). Otra adquisición clave, fue la compra de Marvel en 2009 por 4MM US$ (La última de sus películas Avengers: Endgame, la más taquillera de la historia de Disney, vendió entradas por 3MM US$). En 2012, Disney compró Lucasfilm (histórica productora de Star Wars), por 4,05MM US$, y posteriormente anunció una muy lucrativa tercera trilogía de Star Wars. Por último, en marzo de 2019, Disney concretó la adquisición de 2oth Century Fox, en marzo de 2019, por la extraordinaria cifra de 73MM US$, sus resultados aún están por verse.[10]
Analizar la competencia de Disney es algo trabajoso, dado la variedad de sectores en los que se involucra y la falta de compañías que abarquen tantos sectores como Disney. Considero que la compañía que más se aproxima en cuanto a sus operaciones y al volumen de las mismas es Comcast (NASDAQ:CMSCA), si bien Disney compite con numerosas empresas en numerosos sectores, como podrían ser, por ejemplo Cedar Fair (NYSE:FUN) o Six Flags (NYSE:SIX) en el negocio de los parques temáticos; ViacomCBS (NYSE:VIAC) o Discovery Communications (NASDAQ:DISCA) en el negocio mediático; así como Netflix (NASDAQ:NFLX) o Amazon (NASDAQ:AMZN) en el negocio del streaming, sobre los cuales hablare más adelante. También compite con segmentos de negocios de conglomerados grandes como Sony (NYSE: SNE) o AT&T (NYSE:T).
Observando a Comcast, el acérrimo rival, vemos que la capitalización bursátil es similar, siendo de 198.301M US$ para Comcast y de 234.538M US$ para Disney, así como los empleados, teniendo 190.000 (CMCSA) y 236.000 (DISN). El desempeño de ambas acciones es parejo, en términos generales Comcast tuvo mejor performance, sobre todo YTD (-3,47% contra -10,26%). En los márgenes y ratios también gana Comcast, supera ampliamente en gross margin (TTM) a Disney, con 56,78% contra 27,95% y en net margin (TTM) con 10,91% frente a un pobre -1,91%. El EPS (TTM) da 2,53 para Comcast contra -0,6 para Disney. Consecuentemente, Comcast pudo mantener un P/E positivo de 17,56.
Si bien los números parecen positivos en la comparación para el lado de Comcast, me parece relevante destacar que lo mismo que fue su mayor ventaja comparativa (la composición de sus segmentos operativos), puede ser lo que la haga perder en la comparación a futuro, dada la absoluta supremacía que tiene la operatoria relacionada con la televisión, así como la falta de un segmento de negocios dedicado al streaming de video (sobre el cual también me referiré mas adelante).[11]
Para analizar el futuro, creo que es relevante hacer unas breves conclusiones sobre la actualidad. En primer lugar, los segmentos operativos mas afectados fueron el segmento de parques temáticos, resorts, etc. y el segmento de los estudios cinematográficos con lo cual los ingresos de Disney este último trimestre quedaron a cargo, principalmente, de los canales de TV (que sufrieron una breve baja del 2%) y de los servicios de streaming.
Empezando por los sectores más afectados, respecto a la producción fílmica (Studio Entertainment), me parece que la situación no es crítica, claramente la situación de la pandemia redujo fuertemente los ingresos del sector (al haberse reducido lógicamente la asistencia a salas de cine). No obstante, el manejo del sector viene siendo exitoso hace años (en los últimos 2 años lanzaron 3 de las 4 películas más taquilleras de la historia de la compañía, Endgame, Infinity War, y el live-action de El Rey León), y no hay indicios de que esto vaya a cambiar en el futuro (hay un esquema de estrenos futuros interesante).[12]
En lo que respecta a los parques, las perspectivas no son tan buenas. La caída para el Q2 2020 fue del 85% en relación al Q2 2019. Es evidente que al haber una cuestión sanitaria de por medio, el turismo va a ser uno de los sectores mas afectados, habiendo sufrido una caída increíble en la primera mitad del año. [13] Actualmente, la actividad comercial de los parques temáticos está empezando a reanudarse, habiendo reabierto las operaciones en Walt Disney World en Florida, y estando a la espera de reabrir Disneyland en California, dada la incertidumbre de la pandemia.[14] No obstante, la recuperación fue peor de lo esperado y a partir de Septiembre Walt Disney World recortará los horarios de sus parques.[15] Asimismo, comparativamente, el desempeño de Universal Studios (propiedad de Comcast), parece ser mejor que el de Disney en esta reapertura.[16] No obstante, es importante destacar el carácter de líder absoluto de Disney en este sector,[17] con una competencia que difícilmente pueda igualar su posición, con lo cual si bien el desempeño en el corto plazo puede ser inferior al de la competencia, es altamente probable que recupere su posición dominante en el mediano-largo plazo.
Es interesante ver, en tercer lugar, el segmento “Media Networks” que consiste principalmente en los canales de TV que Disney posee. Este sector no tuvo una caída significante (solo del 2% para el Q2 2020 en relacion al Q2 2019) en el corto plazo, pero en el largo plazo, es evidente que la tendencia del sector es a desaparecer. Las encuestas y reportes muestran un lento descenso año tras año de la audiencia, tanto de TV en vivo, TV diferida y radio.[18] Con lo cual, a largo plazo, es previsible que este segmento sufra una disminución considerable en su volumen de operaciones.
También es previsible (y así lo reflejan las encuestas), que el reemplazo de la TV tradicional sea protagonizado por los servicios de video streaming (VOD), es decir, por las operaciones del cuarto segmento (Direct-to-Consumer). Disney tiene hoy 3 servicios de streaming, Hulu, ESPN+, y Disney+ (ofrece los tres en un bundle que cuesta US$ 12,99). Como ya dijimos, el incremento de los ingresos por estos servicios durante el FY 2019 fue significante. Veamos la evolución de los subscriptores a estos servicios en lo que va del FY 2020 (es decir, Q4 2019, Q1 2020 y Q2 2020).
Q4 2019 Q1 2020 Q2 2020
Hulu 30,4M 32,1M (+5,6%) 35,5M (+10,6%)
ESPN+ 6,6M 7,9M (+19,7%) 8,5M (+7,6%)
Disney+ 26,5M 33,5M (+26,4%) 57,5M (+71,6%)
Como se puede apreciar, el crecimiento es destacable, sobre todo de Disney+. Yendo producto por producto, cuesta encontrar competidores comparables con ESPN+, con lo cual Disney no tiene mucha competencia. Por su parte Hulu y Disney + son complementarios, la diferencia entre uno y otro radica principalmente en el catálogo (el de Hulu es un poco más ecléctico, el de D+ se centra principalmente en contenidos de marcas propias de Disney), así como también pequeñas características de Hulu que lo diferencian de otros servicios de streaming (incluyendo una versión alternativa de suscripción que incluye TV en directo). Estos dos servicios si se enfrentan a una feroz competencia, participando de la contienda denominada “streaming war” con gigantes como Netflix o Amazon Prime Video.
En ese orden, mientras Netflix tiene 193 millones de subscriptores,[19] y Amazon ostenta un numero similar o superior (habiendo ganado mas de 100M de subscriptores en un año), [20] Disney tiene solo 93 millones entre Disney+ y Hulu (nada mal, considerando que Disney+ está en su primer año de vida). Mirando hacia adelante es posible que el servicio que ofrece Disney expanda su base de subscriptores, así como también es muy probable que la competencia se recrudezca (incluyendo la incidencia de otros servicios como Apple TV+). En ese contexto, el principal motivo para pensar que Disney podría ganar la “guerra” los próximos años podría ser el amplísimo catálogo de licencias de personajes, series, y películas que posee el conglomerado (Star Wars, Los Simpson, Marvel y todos sus superhéroes, por solo mencionar algunos), que podrían tener muchísimo mas peso que las producciones originales de sus competidores. Por otro lado, el servicio de Amazon, por ejemplo, resulta mas atractivo en cuanto a pricing, porque le es ofrecido como un beneficio a todos los que cuentan con una subscripción de Amazon Prime)
A forma de conclusión, es difícil imaginar un futuro adverso a largo plazo para Disney. Sin embargo, su desempeño en el corto-mediano plazo dependerá de varios factores (quizás valga la pena analizar Comcast para el corto-mediano plazo, para el largo parece ser una desventaja fatal el hecho de que no estén compitiendo fuerte en la guerra por el streaming), en mi opinión, principalmente de la reactivación del turismo (tanto domestico como internacional) así como del desempeño de sus servicios de streaming (y el desempeño de sus competidores).
Fuentes
-Forms 10-K y 10-Q, principalmente los últimos, toda la información esta en https://thewaltdisneycompany.com/investor-relations/
-Yahoo! Finance: https://finance.yahoo.com/quote/DIS?p=DIS
-Otras fuentes, especificadas en los footnotes

[1] Datos en base a gráficos de https://www.tradingview.com/chart/
[2] Datos de https://www.macrotrends.net/stocks/charts/DIS/disney/dividend-yield-history y https://www.nasdaq.com/market-activity/stocks/dis/dividend-history
[3] El año fiscal de Disney comienza en septiembre, por lo que los reportes de ellos (y el orden de los trimestres del año fiscal) se presentan en consecuencia. No obstante, cada vez que me refiera a un determinado trimestre o quarter, lo hago en base al año calendario.
[4] En base a datos de los filings ante la SEC y de https://www.macrotrends.net/stocks/charts/DIS/disney/shares-outstanding
[5] En base a una comparación con datos de https://siblisresearch.com/data/price-to-book-secto
[6] Información de https://finance.yahoo.com/quote/DIS/holders?p=DIS
[7] Información de https://www.nytimes.com/2020/04/12/business/media/disney-ceo-coronavirus.html
[8] Si se quiere mas insight sobre Bob Iger, es recomendable la biografía de Steve Jobs que hizo Walter Isaacson
[9] Datos del proxy statement de 2020 https://otp.tools.investis.com/clients/us/the_walt_disney_company/SEC/sec-show.aspx?FilingId=13852150&Cik=0001744489&Type=PDF&hasPdf=1
[10] Ver https://www.cnbc.com/2019/08/06/bob-iger-forever-changed-disney-with-4-key-acquisitions.html , https://money.cnn.com/2006/01/24/news/companies/disney_pixar_deal/ , https://money.cnn.com/2009/08/31/news/companies/disney_marvel/ , https://www.bbc.com/news/business-20146942 , https://www.the-numbers.com/box-office-records/worldwide/all-movies/theatrical-distributors/walt-disney entre otros
[11] Comparaciones con el screener de TradingView: https://www.tradingview.com/screene
[12] Ver https://editorial.rottentomatoes.com/article/upcoming-disney-movies/
[13]Estadísticas del sector en: https://tradingeconomics.com/united-states/tourist-arrivals
[14] Ver https://www.usatoday.com/story/travel/experience/america/theme-parks/2020/08/10/disneyland-california-theme-parks-left-limbo-covid-19-surge/3319886001/
[15] Ver https://deadline.com/2020/08/walt-disney-world-cut-hours-september-1203008260/
[16] Ver https://www.foxbusiness.com/lifestyle/universal-sees-more-visitors-than-disney-amid-coronavirus-report
[17] Ver https://www.forbes.com/sites/niallmccarthy/2019/05/23/the-worlds-most-popular-theme-parks-in-2018-infographic/#7c2354e577ac , https://edition.cnn.com/travel/article/most-popular-theme-parks-world-2018/index.html , https://www.teaconnect.org/images/files/TEA_268_653730_180517.pdf
[18] Ver https://www.nielsen.com/us/en/insights/report/2020/the-nielsen-total-audience-report-august-2020/
[19] Form 10-Q Q2 2020 Netflix: https://d18rn0p25nwr6d.cloudfront.net/CIK-0001065280/bcff7d52-7a7d-4e0c-8265-4b6860929fb1.pdf
[20] Ver https://www.forbes.com/sites/petercsathy/2020/01/31/amazon-prime-video-the-quiet-ominous-streaming-force/#6abbe5e41f1a
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ETFs

ETFs
"Don't look for the needle in the haystack. Just buy the haystack." (John Bogle)...
... “aforismo” del creador (o de última el popularizador) del concepto revolucionario del ETF pasivo. ¿Qué se busca? disminuir el riesgo inversor, a través de diluir el riesgo idiosincrático (relativo al activo) con un instrumento, el ETF, que permite exponernos al rendimiento de un sector (IBUY), grupo de activos con alguna particularidad deseada (VIG, VYM), mercado/país (USA, Nasdaq, Corea, B3, etc.) de esta manera si la medida del riesgo es medir la variabilidad o dispersión de rendimientos de un activo (Ej: Nike) transado respecto al SP500 (riesgo idiosincrático), bien podemos elegir invertir en un ETF que lo replique (SPY, IVV) y con eso el solo riesgo que queda es el del conjunto de 500 empresas Top ponderadas por su tamaño (riesgo sistemático; se retira Michel Jordan y no pasa nada, tengo también Adidas y Under Armour).
Luego de la pandemia algunos riesgos idiosincráticos están más representados en SPY, por el peso sideral de 4 o 5 tecnológicas en SP500 pero para arrancar dejémoslo así porque va “casi casi” por ahí.
Los ETFs se comercializan como las acciones por lo que es posible de ser adquiridos por todos aquellos que tengan acceso a una plataforma de trading de un mercado de valores más o menos evolucionado (Merval out por el momento, CEDEARS no conozco)
La idea aqui es transmitir mi modesta experiencia con estos instrumentos anti-miedo. Los Exchange Traded Funds son unos fondos similares a los fondos mutuos (algo así como nuestros FCIs) que nos dan la posibilidad de estar diversificados de una manera práctica, accesible, con eficiencia impositiva y con una liquidez superior. Los hay de todo tipo y una grosera primera aproximación podemos dividirlos en:
ETF Activos: son los que primero salieron al mercado y tienen una gestión de portafolio “activa”, es decir las proporciones de los diferentes activos son elegidas intentando sobrepasar un índice determinado que el fondo replique (El: SP500, FTSE 100, Russell, Nasdaq...etc). Su éxito o fracaso a menudo está relacionado con el de algún gurú proveniente de un hedge fund, family office u otra organización que lo avale y que actúe como “alquimista” del portafolio en busca de un rendimiento diferencial sobre el índice y que además le pague su jugoso honorario. Hoy en día este gestor termina muchas veces siendo el autor de un algoritmo que será la base sobre la que una computadora ejecuta las órdenes de compra-venta en el mercado.
ETF Pasivos: acá lo que se trata es de copiar el rendimiento del índice o activo individual (benchmark) lo mejor posible, por esto la evaluación se hace en base a la dispersión de diferencias que tiene los valores del etf respecto al índice (tracking error). Para lograrlo el fondo compra, de mínima, los activos más representativos del índice objetivo en las proporciones que marca este último. Entonces, esta performance se ve positivamente afectada por dos factores principales, a saber, el costo de administración y la cantidad de dinero que tiene el fondo y que le permitirá representar adecuadamente a todo el universo de activos objetivo, que puede ser muy numeroso. Aquí es bien sencillo, el algoritmo es bien rígido y la eficiencia de costo es superlativa.
Nota: en la actualidad es tal la cantidad de activos en poder de los ETFs, que hay quienes piensan que el sesgo ha creado un desbalance y con ello una deseconomía
Independientemente de aquella división primaria podemos hacer una segunda que es la de los ETF que están “apalancados” (2X, 3X etc.) y los que no lo están (1X), en general para un ETF determinado 1X existe su versión apalancada contra crédito, aumentando mediante esto el volumen transado y permitiendo el magnificar “X” veces sus movimientos alcistas (o bajistas, sadly)
Aburro, pero para finalizar esta intro tenemos también los que son inversos, que buscan moverse en dirección de rentabilidad contraria al activo o índice subyacente. Cada vez aparecen más clasificaciones, de hecho hace poco aparecieron algunos del tipo “filosófico” (pequeña licencia me tomo) que no replican la rentabilidad de un índice sino que siguen una filosofía determinada con una gestión activa (Ej. Contrarian, Dalio*, etc) .
Deseo ante todo transmitir el uso que hago yo del instrumento ETF, la necesidad que cubro con los mismos. Yo los uso como si fueran efectivo líquido, dentro de un portafolio relativamente comprimido con pocas empresas, buscando la seguridad que me da su poca volatilidad y la tranquilidad que por precios relativos me permiten muchas veces no sufrir tanto las caídas por corrección ( menos, claro, el asteroide COVID-19). Por eso priorizo liquidez (volumen transado), performance ( traking error) y costo de gestión bajo (mi máximo ideal es 0.3%). La correlatividad entre estas 3 variables es alta por eso si buscamos usando un scanner ETF de alta liquidez y buena performance es probable que el costo de gestión sea bajo.
Como mi negocio (el que genera mis ingresos día a día) es autofinanciado los ETF son lo primero que compro para ingresar dinero a la cuenta de inversión y lo primero que vendo para hacer retiros y enfrentar con esos fondos las diferentes contingencias que demanda mi actividad. Me ha servido de mucho y me ha permitido que en el largo plazo estos ciclos de compra-venta me dejen una utilidad marginal interesante, incluso con buenos dividendos si logro estar dentro en las fechas ex-dividend, claro.
En diferentes momentos del mercado uso y he usado los siguientes:
VTI (Vanguard Total Stock Market Index Fund)
VYM Vanguard, empresas maduras con dividendos altos
VIG Parecido al anterior pero con el agregado que tienen alto potencial de crecimiento
GLD Con este y con el siguiente tenemos exposición al precio del oro, sin el riesgo de las empresas extractoras que a mi juicio es político y ambiental. En este caso el oro está en el Banco de Londres (como el de Maduro). Nota: Beta de 3 años -0.01 y es caro 0.4%
BAR Idem anterior pero más barato, estando en 0.17%, tiene barras de oro en el London Vault.
BOVA11 Brasil, B3 (ex-bovespa) tiene ETF y este es el más importante, replica el índice de la Bolsa de San Pablo.
..y últimamente *RPAR (Risk Parity): Es carito (0.5%). ETF de ETFs para hacerlo eficiente en el aspecto impositivo. Lo empecé a usar experimentalmente pues me parece interesante porque está basado en el muy disruptivo “All Weather Portfolio” de Ray Dalio, intentado justamente esto, seguir la exitosa “filosofia Dalio” de un ETF que simule un portafolio diversificado de manera que soporte todos los cuatro escenarios (estaciones) posibles de la economía (googleen, es espectacular la idea y seguro no va a ser el único de este tipo dentro de poco)
Los de Sp500 SPY e IVV no los uso porque pesa FAANG que ya tienen su lugar en mi portafolio.
Finalizando, creo que para un inversor con alguna aversión al riesgo son herramientas muy nobles ya que incluso con solo cuatro bien elegidos uno puede tener un lindo portafolio para aburrirse con él, cosa que es clave a mi modesto saber y entender para que la cuenta crezca, ideal si se van a hacer compras escalonadas a lo largo de una vida laboral. Sin ir mas lejos Warren Buffet, quien ha dicho que “la diversificación no tiene sentido si uno sabe lo que hace” a concedido que Bogle es “probablemente” el gestor de fondos más revolucionario de la historia porque ha facilitado el acceso a los mercados de acciones empresariales a mucha gente no especialista, a muy bajo costo y con muy buena gestión de riesgo, confesando que es la herramienta ideal para dejar fondos a resguardo en herencia para el común de los mortales, por encima de los riesgosos, caros y crípticos hedge funds.
Disclaimer: Antes de invertir lean, esto es una intro. Al momento de escribir pienso así pero como diría Keynes “puedo cambiar si la circunstancia cambia” y "No hay nada más peligroso que la búsqueda de una política racional de inversión en un mundo irracional."
Exitos.
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The Fall of Venezuela's Regime: Maduro's Revenue Sources

Welcome to another edition of my EffortPost Series, preview of a possible Second Coup Attempt in Venezuela
Venezuela's Regime have suffered a massive decrease in revenue sources over the last 5 years. On 2019, SENIAT informed contributions from Wealth Taxes, IVA and other associated Tax Incomes closed near 30 trillion Boliviars
Due to Venezuelan hyperinflation, translate Bolivars into dollars is not an easy task. But, in average, each month Venezuela reports 140 million dollars on Tax Revenue
With a yearly income of ~1.7 Billion dollars, their annual budget of 4.5 Billion dollars does looks a little suspicious. But it could easly be explained by Inorganic Bolivars entering the market. At cost of Mass Hyperinflation, they manage to sustain their Government for another couple of months
But overseas, that trick won’t fly. No one outised Venezuela will take those Bolivars regardless of what Maduro has to say. So they gotta have a reliable source of dollars to pay for their imports, debts and bribes
So…Where are all those dollars coming from?

PART 1.1 OIL EXPORTS

Let's start with the most obvious source of Income: Oil. Almost 95% of legal Venezuelan exports are oil related, being also the biggest (legal) source of revenue for the Regime
But...How much profits PDVSA really produces?
According to Reuters*, PDVSA made over 106 Billions dollars in 2012. By 2018, and following a sharp decline in global prices, that figure dropped to 21 Billions
In 2019, both the USA and Lima's Group initiated economic sanctions on Venezuela in attempt to oust Maduro
Sanctions have been the Bane of Maduro's Regime. On top of their already lackluster revenue, restrictions pushed away many of their trading partners, to a point PDVSA was forced to add discounts on their Oil Barrells*, in an attempt keep their allies from leaving. According to Reuters insiders, those discounts could go as high as 50%* of the real Barrel value
Production costs in Venezuela are state secret, making the royalties PDVSA produces to the State a mystery. Reuters informant were told the production cost went from $10 to $12 per barrel, excluding a 33% royalty PDVSA pays to the government. It's unclear if those cost include trading those barrels
Some experts say PDVSA becomes profitable at 18$ per barrel*. On 2016, PDVSA itself reported the profit margin started a 23$
A couple of days ago, Maduro recognized they wouldn’t make any profit if prices go lower than 28$ per barrel*. Weather this is true or not, it's hard to say. But analyst estimate the expected revenue coming from PDVSA to the State will decrease to a mere 4.5 Billons with the barrel on 25$*
Profits coming from PDVSA : ~4.5 Billion Dollars

PART 1.2 ILLEGAL GOLD MINING

Illegal Gold mining in Amazonas have turned into the second source of income for Venezuela State. It's reported 91% of Gold extracted in Venezuela is not produced legally*. According to Lima's Group, it's the biggest Ecocide the Amazon is facing right now
Gold coming from violent extraction is "washed" and melted with legal gold, then passed off as 'bleached' to the vaults of state or private banks*. This process is mostly coordinated by two groups: Guerrillas in the Amazons and the Central Bank of Venezuela, that (allegedly) does most of the money laundering
This profitable crime has recently become more dangerous, as result of International pressure. Attempts to catch illegal mining trade across the borders have increased, causing millions of dollars in lost revenue with each new confiscation
• How much profits Illegal Mining produces?
In 2019, Government expected to receive 5 billion dollars from Gold Mining in 2019 (It's unclear if this occurred or not). Congress, on the other hand, reports this number is closer 1.8 Billion. This seems to be in line with the number reported by the Government in 2018, when Venezuela announced 2 Billion dollars in royalties from Gold extraction
Profits coming from Gold extraction: ~2 Billion Dollars

PART 1.3 DRUG TRAFFIC

Biggest fully Illegal source of revenue for Venezuela's Government. The Government officials involved in this scheme are part of the Cartel de los Soles*
“There are indications that in the Bolivarian Republic of Venezuela, criminal groups have succeeded in infiltrating government security forces, forming an informal network known as the ‘Cartel of the Suns’ to facilitate the passage of illicit drugs into and out the country,” indicated the report of InSight Crime on February 27, 2020
The amount of revenue coming from drug traffic taxes is unclear. The closer numbers I could find was a 2017 USA report about money laundering in the Alba Coalition rising to ~2 Billion dollars across the whole Region
Similar to Gold mining, International enemies of Maduro have drastically increased their confiscations of Drugs near the Caribbe, in an attempt to stop Cartel de los Soles main source of revenue. USA's South Command is now deployed near Venezuela, taking all chances they get to capture narcotics exports
• How much of that revenue actually goes to the Venezuelan State?
It's fair to say Gangs pay tariffs to operate in Venezuela, but how much of those tariffs goes to Tax Payer money is impossible to find. Personally, I imagine most of that revenue stays in hands of the Military officers and members of the Government
Profits coming from Drug Traffic: Unclear. Most likely, less than ~2 Billions

PART 1.4 PDVSA ASSETS

Soft-Privatization of PDVSA is certainly a controversial topic. But, given the current circumstances, seems to be the last source of revenue possible to sustain the Venezuelan boat afloat
Recently, the Government announced a re-structure of the Oil Company. According to worldoil.com, the plan is cut in half PDVSA’s 24 affiliates, including construction and farming projects. Foreign offices and assets in Ecuador, Bolivia, Uruguay, Paraguay and Argentina are to be sold, leaving only some existing branches in the Caribbean and the U.S. Plus, International partners at nearly half of 46 joint ventures will take majority control*
With PDVSA-only operated fields opening to foreign investment, more investments could come to country. But, as shown by the Russian company Rosneft, companies willing to cooperate with Venezuela are subject to USA sanctions. Just last week, the Swedish refinery Nynas announced PDVSA sold their majority in shares to avoid USA Sanctions*. Even the Oil giant Rosneft, had to stop their Direct transactions with PDVSA to avoid economic pressure coming from the White House
• How much PDVSA assets produce?
In theory, the Oil Company have massive amounts of assets on his disposal. In practice, situation is far more complicate than that.
The amount of Debt piling up in PDVSA have go trough the roof in the past decade*, and both Investors and Banks are seeking to seize Venezuela assets in compensation to their unpaid debts * To keep PDVSA functioning, Maduro had to find a way to pay off some of their Debt to key investors. It's my educated guess, their way of paying up, is selling their Oil Company assets across the World and (in the future) privatize PDVSA
(Privatize PDVSA itself has a key problem though…But I am going to leave that topic for another post)
Profits coming from PDVSA assets: Unclear. Shares might be sold as Debt payment to Key economic partners

PART 1.5 CENTRAL BANK OF VENEZUELA

The International Reserves of the Central Bank of Venezuela are a key player in Maduro's Regime. It deserves its own post, so I will leave this part for another day...
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DeFi: como escapar del peso (y de la AFIP). Capítulo 2

DeFi: como escapar del peso (y de la AFIP). Capítulo 2
Capítulo anterior: Introducción
Capítulo 2: Lending
Aplica mismo disclaimer que el capítulo anterior
Existen varias plataformas que permiten tomar créditos en USD digital (USDC, DAI, etc) dejando como respaldo otras cryptos en un porcentaje mayor al que se se toma prestado (over collateralization), asumiendo una tasa de interés. Por ejemplo yo podría bloquear (dejar en garantía) 1 ETH (~240usd) y con eso llevarme 150DAI. Cuando quiera, devuelvo los 150DAI + el interés, y con eso me desbloquean mis ETH. Todo esto puede hacerse de manera automática, sin intermediarios y mediante smart contracts.
La contraparte de este sistema son quienes aportan eso DAI para prestar. Al igual que como en teoría funciona el sistema bancario, otras personas depositan sus DAI, los cuáles son prestados, y cambio reciben un interés mensual, diario o hasta incluso cada segundo (ver en vivo como se reciben intereses por segundo es una linda experiencia). La seguridad de los depositantes está dada en que el sistema esta "sobrecolateralizado", es decir que hay mas activos bloqueados como garantía que los prestados. A diferencia de los bancos que trabajan con reserva fraccional.
Las tasas de interés para tomar créditos o prestar van variando según diferentes circunstancias del mercado. El sitio LoanScan es un buen comienzo para saber que pagan en diferentes plataformas por prestar tus crypto, que pueden ser las tradicionales (BTC, ETH) o stablecoins (USDC, DAI). Es importante diferenciar entre las plataformas centralizadas, es decir aquella a las cuáles se les transfiere los activos y estos quedan en su custodia, de las descentralizadas, en las cuáles no hay un actor o empresa a quien se le deposite, sino que todo se maneja mediante smart contracts y no existe el riesgo de que la empresa funda o la hackeen y desaparezcan los fondos. Otra (gran) diferencia es que en las centralizadas vas a tener que crear una cuenta, pasar por un proceso de KYC, presentar documentación, etc., mientras que en las otras todo esto no es necesario, ya que se maneja directamente desde la wallet propia.

https://preview.redd.it/1gooaloxca351.png?width=850&format=png&auto=webp&s=ab947cbfd38df27323297946eec86ae59d1650a5
En esta captura de LoanScan se pueden ver las tasas de interés que pagan los préstamos en USDC y DAI. Actualmente en las plataformas centralizadas se está pagando mejor, pero esto puede variar con el tiempo. Vamos a tomar algunas como ejemplo:
BlockFi
Blockfi es una empresa de USA que se dedica a prestar cryptos y permite a otros usuarios financiar esos préstamos obteniendo a cambio una tasa de interés. Actualmente pagan 6% por BTC, 4.5% para ETH y 8.6% para las stablecoins (USDC incluído). Con sólo crear una cuenta en este sitio y depositar algunos USDC, estos van a empezar a generar intereses sin necesidad de hacer nada más. Los pagos se realizan el primer día del mes por lo acumulado en el mes anterior. Ej: si deposito 100USDC, a fin de mes me van a depositar 0.71USDC de interés. Ese monto se suma al que uno tiene adquiriendo interés, y el mes siguiente el interés será sobre 100.71USDC (interés compuesto). Uno puede elegir si recibir el interés en la misma moneda que lo genera (en BTC si tengo BTC y ETH si tengo ETH) o todo en una, al tipo de cambio correspondiente (por ej. puedo tener BTC, USDC y ETH depositados y cobrar todo el interés en USDC).
Nexo
Nexo es un sitio muy similar, basado en Suiza, donde también se pueden depositar varios tipos de cryptos. En este caso aparte de USDC se puede depositar DAI. La tasa para estos stablecoins es de 8%, y los intereses se pagan todos los días, a la medianoche de Europa.
El funcionamiento de ambos es básicamente el mismo, y los riesgos también: al tener depositados los fondos en esas empresas, estos siempre pueden ser bloqueados, trabados, robados, fundidos, etc. como en cualquier banco o broker tradicional. Las ventajas: una curva de aprendizaje mucho menor, no hay muchos tecnicismos ni cuestiones complejas que entender. Simplemente le prestas tu plata a una empresa, y esta te paga un interés. La creación de una cuenta es muy simple, no tienen restricciones de países y es un proceso 100% online de sólo unos minutos.
Exchanges
Existen algunos exchanges (Poloniex, Bitfinex entre otros) que también brindan la posibilidad de prestar crypto y pagan un interés. En este caso los fondos los usan quienes operan con leverage (margin trade), donde también tienen que colateralizarsu posición y eso disminuye el riesgo de no pago. Las tasas van variando según la cantidad de oferentes y demandantes y lo que esté dispuesto a recibir y pagar cada uno.
Comparten estas empresas información fiscal por los tratados de intercambio de información automática? No lo sé, y si alguien lo sabe sería bueno que lo comente. Lo único que me puede dar una pista es el país en el que esta registrada cada una. Lo que no se puede evitar en estos casos es tener que registrarse con los datos personales reales presentando documentación, al igual que un broker o banco tradicional, aunque mucho más fácil y rápidamente.
Servicios Descentralizados
Son aquellos en los que no hay una empresa que custodia y administra lo prestado, sino que funcionan directamente mediante protocolos (o smart contracts) que gestionan todo.
Oasis Save
Maker DAO (DAO es una organización autónoma descentralizada) opera la moneda DAI y tres servicios en su plataforma OASIS: Trade, Borrow, Save. Con Oasis Save uno puede bloquear sus DAI, los cuáles son a su vez prestados a otros en Borrow, y obtener un interés a cambio. La tasa de interés esta definida por los participantes de esta organización autónoma mediante una votación, y se usa para incentivar o desincentivar la demanda de DAI, y con eso mantener el peg 1:1 con el USD. En términos generales, si el DAI cotiza por debajo de 1USD, se sube la tasa de interés, y si este opera encima del dólar, se baja.
Para participar únicamente es necesario ingresar a Oasis, loguearse con la wallet propia y decidir cuántos DAI bloquear en Save. Automáticamente se empezarán a recibir intereses por cada segundo que transcurra con tu dinero prestado. Los DAI nunca son transferidos a nadie, simplemente son bloqueados en un smart contract, por lo que mientras estén ahi no los vas a poder transferir ni usar para otra cosa. Para salir, lo único que hay que hacer es retirar los fondos, lo cuál va a hacer que se deje de recibir el interés.
Hoy la tasa de interés de DAI Save es de 0%, lo que hace que obviamente no tenga sentido participar, pero esto cambia permanentemente. Al estar DAI cotizando por encima del USD (aprox. 1.02) se fue bajando la tasa de interés hasta llegar a 0%. Hoy esta cotizando nuevamente a $1, por lo que es probable que se vuelva a subir en el corto plazo.
Aave, Fulcrum, Compound, dYdX
Asi como Oasis es la plataforma nativa de DAI, existen muchas otras que funcionan básicamente de la misma manera, operando como un intermediario (aunque es sólo código) entre prestamistas y tomadores de deuda.
Aave, Fulcrum y Compound son tres de las principales, aunque hay muchas otras. En las tres se encuentran opciones para prestar diversas cryptos, manejando cada una su tasa de interés que puede ser fija o variable. dYdx es un exchange descentralizado, donde los prestamos son para traders utilizando leverage, al igual que lo descripto arriba con Bitfinex o Poloniex, aunque sin un tercero que administra todo.
Al momento de escribir esto, si uno tiene DAI y quiere prestarlos, le convendría depositarlos en dYdX que ofrece una tasa del 3.24% y si tiene USDC la mejor opción sería Aave, que rinde 3.68%. Pero esto puede cambiar en cualquier momento, siendo la mejor ventaja de operar con crypto que moverse de una plataforma a otra puede hacerse en cuestión de minutos y por un costo muy bajo. Incluso hay robots que se pueden usar para administrar los fondos y que te los vaya moviendo adonde mas convenga en cada momento (lo trataremos en otro capítulo)
Pool Together
Otro proyecto interesante es Pool Together, al que ellos definen como una lotería en la que no se puede perder. Participar de este juego requiere depositar DAI en un pool al que también aportan otras personas, luego ese pool se invierte y se obtiene un interés y al final de la semana se sortea ese interés adquirido entre todos los participantes con chances proporcionales a lo aportado. Es decir que si tengo 100DAI, en vez de invertirlo por mi cuenta puedo participar de este pool y tener la posibilidad de ganar un interés mucho más grande generado por un pozo mayor. A todos los que no ganan se les devuelve lo aportado, de ahi que nunca se pierde el capital inicial.
Conclusión
Lo más interesante de lo explicado en esta última parte es que todo esto se gestiona sin una persona o empresa intermediaria en la cuál haya que confiar, sino simplemente con código que se ejecuta según las reglas predefinidas en el protocolo. La clave de estos servicios descentralizados es que son non-custodial, es decir que nadie (más que uno mismo) custodia los fondos, y por lo tanto uno en ningún momento se pierde el control de ellos ni tiene que transferirlos, simplemente los bloquea en un smart contract bajo su control.
Según lo explicado en el capítulo anterior y este, uno podría pasar sus pesos de papel a DAI en una operación con otra persona para luego invertirlos en alguno de estos protocolos descentralizados. Pasaría a estar recibiendo un interés en una moneda atada al dólar que puede reinvertir, guardar o transferir adonde quiera, sin permisos ni papeles, formularios o burocracia alguna. Toda esta operación es privada, sin nadie que pueda intervenir, opinar si es correcto o no, definir si podes hacerlo según si anteriormente participaste de otro mercado o patalear porque fuga de capitales o idioteces semejantes.
En la vereda de enfrente están los servicios centralizados, regulados por el estado como entidades financieras, y donde uno debe siempre enviar sus datos personales para poder operar. Lo más prudente en estos casos a mi criterio es asumir que toda esa información es compartida con el fisco, ya sea de manera automática o bajo pedido. Esto aplica tanto para un exchange (en Argentina Ripio, Buenbit, etc.) como a las plataformas de lending descriptas arriba.
El Lending permite prestar tu dinero de manera segura y obtener un interés a cambio. Para poner un equivalente que todos conocen, sería algo asi como tener un bono pero en vez de estar emitidos por estados o empresas, son otras personas las que toman la deuda. Y vos también podés hacerlo si necesitas liquidez y no querés vender tus activos.
Próximo capítulo: Synthetix y como obtener exposición a cualquier activo del mundo real.
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How Argentina learnt to stop worrying and combat coronavirus

As anyone who hasn’t spent the last month under a rock knows, the COVID-19 coronavirus is a big deal to the global economy, and governments have taken a number of potentially disruptive measures to contain it. The aim of this post is to look somewhat closely at the likely impact to the economy of this famously unstable country, and to briefly weigh the policy actions of the Alberto Fernández administration against their costs.

A little context

Argentina and economic collapse, name a more iconic duo. In the past decade, the inflation rate went from the twenties to the fifties, and 2019 had the highest recorded figure in almost thirty years: 53.8%. The country has not grown for two consecutive years in an entire decade, and official figures for most relevant variables, including unemployment and production, are unreliable (to put it kindly) since the official statistics agency was intervened by politicians and pretty much faked its data for ten years.
In 2015, the reign of a faction of Peronism (the dominant political ideology/party in Argentina, an economically left, nationalistic, autarchic, anti-globalization movement) known as Kirchnerism, with more ties to the hard left and more socially progressive than the rest of the party, came to a close after 12 years of dominance: their prefered Presidential candidate, Daniel Scioli (an unpopular, unexciting, uncharismatic Governor who lost an arm in a boat racing accident) narrowly lost a runoff to the center-right Mauricio Macri, the mayor of the country’s capital. Macri ran on a platform of change (his coalition of centrist parties was literally named Cambiemos, or Let’s Change) and promised to lower taxes, reduce regulations, open the economy, and lead Argentina into a new era of market-based prosperity. This did not pan out: after a rocky first year, where the lifting of currency controls and sky high raises in public utilities led to a 40% inflation rate, nearly 15 point above the previous year’s, 2017 looked bright: GDP grew, wages increased, inflation returned to its prior levels and seemed to be going down, and the government scored a double-digit win in the midterms.
2018 was even more promising, until May: following a series of policy and communications missteps by the government, investors became more bullish on the nation’s ability to repay its significant dollar-denominated debt; when the Fed raised rates in May, capitals bled out of the country and the peso began depreciating for months, more than doubling from 19 pesos per dollars to over 40 by the end of the year; the economy took a beating, with GDP collapsing and completely erasing the previous year’s gains. 2019 was tougher: Macri became, obviously, increasingly unpopular - but still stood a chance because his likeliest rival, the divisive and corrupt former President and sitting Senator Cristina Fernández de Kirchner, appeared to be an even less palatable candidate - and voters going to moderate Peronist economist Roberto Lavagna looked more like Macri than Kirchner supporters. In an unexpected, risky gambit, Kirchner picked her former Chief of Staff, the little known and more moderate Alberto Fernández (no relation, it’s a common surname) to run for President, with her being his running mate. This bet paid off: Fernández united the entire Peronist party (no easy task, since Kirchner wasn’t particularly popular with Peronist Governors) and surpassed all expectations: while polling had him in dead heat against Macri, the high number of undecided voters made the race extremely volatile. After two hours of delays, the results of the national primaries (basically a trial election) came in: Fernández had beat Macri by nearly 20 points, 49 to 32, and was, by all intents and purposes, the next President. The markets did not take this well, since the winning candidate was notoriously vague and tight lipped in his positions: in a single day, stocks and bonds plummeted by 55%, and the peso depreciated another 33% - to 63 pesos. Macri performed better in the October elections, getting 40% to Fernández’s 48% due to higher turnout, but still lost. 2019 was another bad year: GDP shrank by 2.2%, unemployment soared to 9.7% (it later came down to 8.9%), and poverty rose from 25.4% (a historic low) in 2017 to 35.4% in the first semester; the only positive figures are the fiscal deficit, which went from 4% in 2015 to 0.5% in 2019, and the trade balance, which reversed sign and was an astounding 19 billion surplus; the current account deficit was reduced from a staggering 31 billion in 2017 to 3.4 billion in 2019, the lowest since 2012 and mostly caused by the positive trade and service balances.
The Fernandez administration, meanwhile, surprised in its moderation: efforts have been made to somewhat maintain fiscal balance, while also increasing welfare payments without committing “populist excesses”, to somewhat speak. The fiscal balance has been weak, though, with Economy Minister Martín Guzmán only vowing a surplus in 2023 and returning to the much dreaded “gradualism” of the Macri era. Fernández seemed mostly interested in one issue: restructuring the country’s substantial debt (nearly 90% of GDP), which included a record breaking program by the IMF and the products of a previous restructuring, in 2005, after the country defaulted in 2002 (it would partially default again in 2014) - Guzmán himself is an academic focusing on the issue, and a disciple of the “heterodox” Nobel Laureate Joseph Stiglitz at Columbia.

The healthcare system

Argentina’s healthcare system is complex, heterogenous, and very poorly supervised - public health is not mentioned in the Constitution, putting it under the purview of provinces, except for some compromises between jurisdictions to make it run smooth.
Considering the demand side of healthcare, the age structure of Argentina is not particularly concerning: only 15% of the population is over 60, and, on average, 88.5% of those over 60% have some kind of health insurance. Speaking of, 60% have any kind of insurance, according to census data - higher with age. Although 35.4% of the country lives in poverty, this number plummets to around 10% in older groups - providing a better safety net for the most vulnerable groups (children, by comparison, have a 52.5% rate). The country is only worryingly densely populated around the nation’s capital, the City of Buenos Aires, whose metro area comprises 13 million people and an expanded definition is inhabited by almost 20.
On the provider side, the country’s hospitals are mostly run by the provinces, except a handful in the orbit of the national government. According to the government, the country spent 9.8% of GDP on healthcare - 6.6% by the public sector, and 2.8% by private companies. The country seems to have a low number of physicians, hospital beds, and nurses - yet the larger provinces with a higher number of cases seem better prepared. Still, the glaring inequalities in the country make it clear that being ill in the wealthy City of Buenos Aires or the oil producing, sparsely populated Santa Cruz would be highly preferable to Chaco or Misiones. Another notable issue is the disparity between systems: private insurers (“prepagas”) offer extremely high quality care, as does PAMI, Argentina’s equivalent to Medicare (it is, in fact, a state-run public insurer for the elderly). The problem comes with the public system, which is much higher quality in richer provinces, especially in the less populated Patagonia.
The country, despite not being at such apparent risk, has taken measures extremely early: a full quarantine was announced roughly 20 days after the first confirmed case. The main situation is the country has only really tested those who either traveled abroad recently or were in close contact to those who did - meaning that official statistics of 500 infected, 8 dead aren’t particularly meaningful, and the number of tests administered isn’t publicly available.

Employment, poverty, and consumption

The country being under a quarantine poses a significant risk: 35% of the labor force works in the informal sector, and another 15% is self-employed. This means that, under a lockdown, nearly half of the population wouldn’t receive any income. The Catholic University of Argentina's Observatory for Social Debt (sworn enemies of mine, if you’ve read my previous post on poverty) estimates that 32% of people don’t receive any kind of formal salary, and that just two thirds of those families don’t even collect welfare checks - so 10% of homes will be deprived of all forms of income during a lockdown. The government has tried to mitigate this: bonuses for welfare recipients and the poorest retirees were announced, a $10.000 bonus for the unemployed,and some self-employed people was enacted, and the steps have been taken to ensure that people don’t lose access to basic necessities: a temporary ban on eviction and loss of utilities, a freeze on housing credits and rent, and price controls. The Social Development Minister, Daniel Arroyo, recently declared that 11 million people are receiving nutritional assistance, 3 million more than before - and 3.5 million of whom are children.
The consulting firm IDESA paints an even bleaker picture: they claim 45% of all Argentinians live off of informality, meaning the quarantine, on this basis alone, could deal a crippling blow to nearly a majority of families. Others have gone further: a recent report claims that 5.5 million people are at “very high” risk of losing their jobs based on their employment status (self employed of informal) and at slightly lower risk depending on the sector they work in, even if they are registered. The government responded to this by banning firings and suspensions by decree, which will obviously negatively affect job creation (which is at historic lows anyway, according to Ministry of Labor data).
Consumption has also been negatively impacted, since the incomes of those newly unemployed will obviously decrease; some retailers have experienced decreases of 50% in sales, and many have estimated that people simply won’t be able to afford their living expenses or their credit card bills (which were recently postponed until after the quarantine is over).

Economic activity and output

Economists estimate that each day of the quarantine reduces GDP by 1 to 1.4 billion, although there is a massive caveat - their projections are all based on national holidays and workers’ strikes, which are quite different because they are both scheduled in some advance, aren’t particularly long (the longest national holiday lasts about 3 days), and national holidays in particular have much higher “entertainment” (cinemas, theaters, restaurants, vacations, etc.) spending than usual.
The aim of government policies so far seems to be to mitigate the loss of income on poor families, while not spending too much - the public sector has an extremely limited margin of action, given that current commitments make up 0.6% of GDP with revenue in free fall due to lower activity (VAT, income tax, and export taxes have been particularly deteriorated lately). The demand shock to some sectors will be highly negative: tourism, entertainment, non-basic goods, etc. As you can see here,the largest sectors of the economy (Industry, construction, and retail) will be hardest hit.
Starting with construction, things are not looking good: work has ground to a halt, while it has already had its worst performance in decades. The sector also has a very high demand for labor, some of the highest rates of labor informality, and is the third largest sector of employment (360k workers in December) which makes it a ticking time bomb of lost income that has to be addressed as soon as possible - and the government has announced new credits for construction, and a 100 billion public works plan. The sector has already registered its lowest employment levels ever this year, and in an omen for things to come, the massive multinational company Techint has already laid off 1500 workers based on estimates that their profits in April will be 0.
Regarding industry, after it has the worst indicators for production in since 2002, only the food and pharmaceutical industries seem to be trending upwards - and they only account for a third of industrial workers, which make up themselves a fifth of all workers.Industrial Union figures claim that just 20% of manufacturers are currently active - and that the entire sector is having difficulties paying salaries or acquiring components. Car manufacturers have shut down production until April, and expect to sell fewer than 200 thousand units this year; and the electronics sector has followed suit. While industry does not have the same level of informality construction does, some issues may arise. The main complication will be supply chains, since many key components for industrial production are imported - and most major manufacturers (notably China) are dealing with the aftermath of their own coronavirus responses. And lower projections for growth in Brazil could especially hurt the automotive industry, where 50% of units sold are destined for the Latin American country, and whose growth has a large impact on Argentina’s manufacturing sector (note: even if the article is old, it still very clearly illustrates the close relations between the countries).
Retail is the biggest problem: after a 30% surge in sales in the days leading up to the lockdown (mostly in large chain supermarkets and wholesalers), sales collapsed as people became more frightened to leave their homes: restaurants have reported a 55% drop in sales, bakeries an 80% decrease, and 70% of small shops have already shut down until people are back in the street, since their sales decreased by 50% as well. Retailers in most sectors express concern, and most restaurants, bars, and “proximity businesses” (drugstores, corner shops, and small convenience stores known as “Chinese supermarkets” because their owners are generally Asian immigrants) have seen their income go from a steady stream to a small trickle, mostly due to online shopping and home deliveries - amd 20% of these smaller stores have closed their doors for the duration of the quarantine. Small business owners have already expressed their concern with the situation, with most expecting steep losses in revenue and some even reducing their staff. The sector is the second largest employer in the economy, with nearly 20% of the workforce as well, and a retail recession, so to speak, could collapse into a vicious circle where a crash in demand is reflected in sales, which forces firms to downsize, leading to even more drops in revenue, which starts the cycle all over again.
Regarding other sectors: hotels, tourism, transportation, etc: have seen their income fall by billions, and combined employ as many workers as the construction construction. Agriculture and other primary activities are probably mostly affected by second order factors, such as lower international demand and lower prices - which puts them in a secondary position for aid; their main issue at the moment is the paralysis in activity affecting docks and trucking due to the lockdown. “Personal services”, the tech sectors, and other highly skilled workers can probably move home and still receive full compensation; some firms, such as “Latin America’s Amazon” Mercadolibre or companies that specialize in consulting or telecommunications, could even thrive in this context. .
All in all, the economy looks like it will take a big hit from the lockdown: experts have estimated that each day in March had a 30% reduction in activity (which could be estimated by the observed drops in the demand for electricity, fuel, and transportation), and some go even further and assume a 45% daily drop in April, due to higher baselines because of seasonal factors. Goldman Sachs predicts GDP would drop by 5.4% in 2020, the largest decrease in 18 years (it was 10.9% in 2002) and more than the previous for years combined.

Trade and the external sector

To begin with, Argentina is basically cut off from financial markets at this point: country risk (the premium the country must pay to borrow) skyrocketed to 4500 points at a maximum, before settling in the high 3000’s, and the country seems to be on the verge of its 9th debt default- restructuring offers are basically dead now, with Guzmán and Fernández previously intending to negotiate during March and April. There is no clear consensus on the specific consequences of a debt default, although this publication by the IMF seems to imply it both causes tremendous damage to a nation’s reputation and cuts off growth by weakening the banking sector (which has taken a pummeling in the last year), even if defaulting itself does not cause degrowth. Since most companies are expected to have difficulties paying salaries due to low liquidity, and most people are also expected to not pay some of their obligations, a financial crash could send shockwaves into an already weak economy. In the longer run, a weak financial sector (like the one Argentina most definitely has) can constrain the access to credit necessary for investment - which is a prerequisite for sustained growth, and which already is at its lowest share of GDP in decades. The government remains adamant that its official position is not to default, but the chances of an offer that both sides are content with are slim - the IMF itself has recently weighed in and supported large haircuts for the sovereign debts of emerging economies.
Secondly, trade: most of Argentina’s leading trading partners (Brazil, the EU, the US, China, South Korea) have been negatively affected by coronavirus - China’s GDP is probably going to plummet in the second quarter, and exports to Asian markets have already decreased by 30%. China alone is responsible for almost a third of all industrial exports, which will surely affect global supply chains negatively, as well as reducing imports. Argentina has mostly been a commodity exporter (they made up 40 of the 65 billion dollars in exports during 2019) and commodity prices have plunged during March - soybean, wheat and corn prices will affect the trade balance most harshly, and oil (which is key to national investment in the Southern provinces) has nearly halved in price, making the U$S 15 billion investments that were planned probably unprofitable. The agricultural sector in particular may be heading to a crisis of its own soon, since restrictions on labor and movement, issues with transportation, and blockages to roads and docks have negatively impacted production and sales - and April is the beginning of the most productive part of the year. Regarding Brazil, Argentina’s largest trading partner, relations have been tense due to the personal and political inminity between presidents Fernández and Bolsonaro (who at one point threatened to leave the Mercosur trade bloc) - and growth and industrial production projections for the neighbouring giant have steeply declined lately, which doesn’t bode well for Argentina at all: those indicators, due to the large entanglements between the two nations, are some of the strongest predictors of Argentinian growth (and vice versa: the Brazilian stagnation and manufacturing recession of these last few years have negatively impacted on its partner, which has also entered a recession of its own to the detriment of Brazil itself).
Another major issue for the government is the peso becoming “overvalued”: due to the high volatility in international capital markets (almost 60 billion fled out of developing countries/arc-anglerfish-arc2-prod-infobae.s3.amazonaws.com/public/IG6CNPW4IFD6VM3QCC5RY5VWXQ.jpg)), most emerging currencies have been battered, rapidly depreciating with regard to the US dollar. The Argentinian peso became one of the strongest currencies of such category (honestly surprising news) because the high rates of inflation mean that any devaluation will be offset by higher national prices; as a result, any gains in competitivity done after the massive devaluations of 2019 have already been lost, since the real exchange rate is, in fact, lower than it was in August. As a result, the country will lose many of its trade advantages over its competitors, which will negatively impact the trade balance (fewer exports + more imports, despite more rigorous controls) and possibly create difficulties in acquiring the hard currency in such high demand in the economy.

Deficits, debt, and the money printers

Argentina’s government has been quick to take action on the healthcare front, declaring a quarantine not even a month before the first cases were confirmed, and extending it for nearly a full month. Their political resolve in handling the pandemic was widely praised, with leaders across the political spectrum working together and Alberto Fernández himself soaring to 90% approval, with 95% of the population approving of his actions.
On the economic front, things have moved way more slowly. The government has mostly taken actions on the demand side, as was previously detailed, by increasing transfers to individuals on the basis of need and with a means-tested mechanism to ensure that nobody “with too much” gets aid. This logic may be questionable, but it is widely accepted that aiding those most in need is correct; so far, these programs have cost about 0.6% of GDP, doubling the public sector’s deficit (from 0.5% in 2019) amid slumping revenue, due to the ongoing recession (lowering income from VAT and, to a lower extent, payrolls and income) and the collapse in foreign trade (hurting export and import taxes). This will surely create difficulties all over the country, since the government will lose its margin of action concerning any future developments; provincial and municipal governments, extremely dependent on sales taxes, administrative charges, and central government remittances, will take an even larger hit (especially some, such as Buenos Aires, Chubut, and La Rioja, which are having serious difficulties with their external debt).
On the supply side, on the other hand, the government has been extremely slow in offering any real support to struggling businesses. 80% of small businesses don't think they could stay in business if the lockdown continues for an entire month, and 70% of companies are planning on cutting costs. Only some sectors (such as tourism and entertainment) received tax cuts, albeit in homeopathic proportions, and some plans to help the construction sector, such as the Procrear credits and a $100 billion infrastructure plan, will take their time. Companies have shown concerns regarding how to pay their employees’ salaries, since the collapse in sales has surely impaired their liquidity - and the Central Bank took measures to inject up to $280 billion into the economy, which has led to much lower rates in short-term borrowing. The government has also recently announced two new programs: government assistance of up to a minimum wage of salaries for companies with under 100 employees, a doubling of unemployment subsidies, and a 95% postponement in payroll taxes for smaller companies (up to 60 employees). This seems to make sense, until you consider that the largest companies have been hit just as hard by the recession in the past year, and that companies with over 100 employees have bled jobs for the last 12 months; this is without even getting into the sector-by-sector measures that almost all those affected (from construction, to cinemas, and small retailers) have already demanded. The fact that this expansion to spending seems to mostly come from into aggregate demand has not put experts at ease: this will not increase revenue at a time of crisis, but it could also be insufficient to protect firms from bankruptcy.
One of the biggest problems concerning an enlarged deficit is that almost all avenues of financing it are unavailable: reducing the deficit itself is impossible, as has been specified, and Argentina (as previously explained) is teetering on the verge of default, so it’s not like the financial sector is dying to lend. So the only remaining alternative is seigniorage: in March, the Central Bank assisted the Treasury to the tune of $125 billion, and has printed nearly $400 billion in this regard since December. Even if, yes, money printer go brr (for example, former Central Bank President and inflation hawk Guido Sandleris has defended the expansion as necessary, with some caveats, during a conference) many economists have recently rung alarm bells: the government's massive expansion of the monetary base (some say 62% in all of 2020, and it has recently reached the record high of 2 trillion pesos) could become a factor for inflation to still go up, from the 54.8% 20-year record in 2019 to the 60’s or even 70’s (since the exchange rate is under steep controls and the monetary base contracted massively in the previous two years, nobody serious is forecasting hyperinflation yet). The inflationary tax being a way to raise revenue in this dire context could be acceptable in the short term - the Central Bank gave $125 billion for the government, while overall emission was at nearly half a trillion and was mostly justified with measures to keep firms liquid and not allow the chain of payments to break - or force companies to not pay their taxes to stay solvent. And in another positive development for inflation doves, the demand of money has risen recently - since people and companies are having trouble paying their bills, their employees, or even buying groceries. This makes it unlikely the new pesos will go to the currency market (a leading preoccupation of policy makers), since that could put pressure for a devaluation and boost inflationary expectations - which generate inflation of their own.
Concerning debt, the government has taken all available steps to create confidence - despite being at ideological odds with the organism, it was recently announced that they would accept a U$S 3.5 billion dollar SDR that was previously refused, added to smaller loans of a couple hundred billion by the IDB and the World Bank to finance the new spending caused by the crisis. The IMF itself has expressed support for emerging markets giving large “haircuts” to their sovereign debts, which Minister Guzmán seems to have taken at heart: he looks set to offer big cuts to interests and principal, a grace period, and maybe even unorthodox instruments like a GDP based bonus. Bonds recovered slightly, and country risk went slightly down; the problematic aspect could be that part of the recovery in bonds could be by “vulture funds” trying to gobble up obligations for cheap to later sue the country and get the full amount from a more friendly government (as Paul Singer famously did in 2019). While Guzmán’s good intentions were appreciated, bondholders did not accept the offer - and countered with a proposal for a 6 month break in payments and negotiations out of mistrust of the government and the options it presented.

Conclusion

Summing up, 2020 is shaping up to be a tough year for Argentina - or even tougher than expected. All indicators seemed to point at the economy being somewhat on the path to a recovery, with a milder recession, less inflation, and a public sector with a small deficit and a friendly (as possible, at least) debt restructuring. Coronavirus came as bad news (where didn’t it, though) at the worst possible moment.
Despite the obvious political differences of most readers with the Fernández administration, it is clear that his handling of the healthcare side of the issue received wide acclaim, even if Latin America’s standards for it are depressingly low. On the economic front, Fernández acted within the bounds of the mainstream and still focused his efforts on the poorest segments of society. In the immediate context, it could seem like a positive - nevertheless, it’s clear that all actors in the economy will be heavily affected by the crisis, and not providing aid to all of them would be inadequate. The government has also undertaken some deeply populist measures that will have no meaningful effect: a list of maximum prices, enforced by AFIP (the tax collection agency) inspectors which has mostly resulted in crackdowns for the small businesses that can’t actually afford to sell at those values.
The authorities could provide the necessary stimulus to the economy, putting those least affected on the back burner until the worst of the crisis has passed; unfortunately, taking coronavirus as an opportunity to enact even stronger controls on market mechanisms out of ideological purity would do a huge disservice to the country at a crucial time.
submitted by mrmanager237 to neoliberal [link] [comments]

Inflation: The Assassination of the Argentinian Peso by the Coward Central Bank

Argentina, if you know anything about its economy, is a very peculiar country. Once (or twice) a prosperous nation, now one of Latin America’s handful of embarrassing basket cases, plagued by everything from deep economic stagnation, high labor market informality, a weak currency, and chronic high inflation.
We will go through a short tour of inflation, starting from the 70’s onward, and will give some extra thought to the current situation. After that, the aim is to focus on more “theoretical” perspectives of inflation, to showcase its causes, and to focus on its consequences. Finally, a brief conclusion about Argentina will have to be reached.

¿What is inflation? (Prices don’t hurt me, don’t hurt me, no more)

Inflation is the generalized growth in the average price level of an economy. If you measured every price of every product in a country over several periods of time (generally each month), then you would be able to perfectly estimate the rate of inflation in an economy. Measuring inflation is generally important because it tends to signal how stable an economy is (an inflation rate of 80% is never a good sign) or, on the contrary, how stagnant it is (Japan has famously had issues raising its near-zero percent inflation, to the point they actually reached out to Argentine economists to learn from us how to get prices moving).
Obviously, measuring literally every price in an economy is hard (citation needed) so governments, as this is an important indicator, learnt how to make do. In Argentina, inflation is officially measured by the National Institute of Statistics and Censuses (INDEC by its name in Spanish) in something of a three-step process. Since this is a little complicated (their manual is 48 pages long) let’s keep it simple: the first step is measuring what people actually consume, by simply asking them and making a list. Secondly, you get in touch with various supermarket, grocery stores, and corner shops around the country (and a whole lot of other things; how the price of things like education, transportation, or home repairs is gathered is a well-kept secret). The final step is building the measurement itself: instead of presenting the “raw” price of the things, you average them up into an index, which is a number that picks a base year and assigns it a generic value of 100 (it is clearly important to actually measure whatever you are adding up), so then every subsequent measurement is expressed as a percentage change regarding the index - and with certain caveats.
The last step has one crucial complication: a 1% increase in food prices or rent is obviously more important than a similar change in newspapers, and a price control policy in a sparsely populated area would get dwarfed by runaway inflation in a major population center. To account for both effects, INDEC assigns weights to each component of its Consumer Price Index (CPI) and to each region of the country - which can lead to some wacky consequences, since just two (Buenos Aires Metro Area and the Pampeana Region) out of the six make up 80% of the CPI.
Obviously this process has many flaws, and the CPI is not the only inflation index (only the most important one), as producers and wholesalers use their own price measurements, in what is called the Wholesale Price Indices System or SIPM. The inflation estimates for the month are generally published on a Wednesday halfway through the month, and always refer to the previous month. For example, the March report (neat graphics, by the way) came out in April: monthly inflation was 3.3%, up from 2% in February, and was fueled by price hikes in Education (due to the beginning of the school year) and communications. Since a strict lockdown was mandated by the authorities, INDEC decided to clarify their measurement process, which is generally conducted by in-person inspectors: they checked supermarket websites, and reached out to stores via phone calls and emails - which may have distorted the prices, because those stores are the likeliest ones to “afford” maintaining the official prices. Most provinces measure inflation on their own anyways, with the two most respected indicators belonging to the City of Buenos Aires and San Luis.

A brief history of inflation

There isn’t a lot of available historic data on inflation in Argentina, considering the government hasn’t always been particularly forthright with it. This delightful graphic found on Reddit (and taken from a reputable consulting firm, if you were having doubts) shows that price stability hasn’t been one of Argentina’s strengths, especially since the 40’s.
To start somewhere on a really long history, let’s pick the 1975 “Rodrigazo”, where - amidst a record 15% government primary deficit - Treasury Minister Celestino Rodrigo hiked public utilities by triple digit rates, massively devalued the peso, and granted eye popping wage agreements to unions - with the consequence that the year had inflation of 350%. The economy was generally devastated, and the government had such a fragile grasp of power the President was deposed by a coup in March 24th, 1976. Inflation in the triple digits (which starts an awkward debate about hyperinflation I do not intend to have) was a constant of the late 70’s and 80’s, until a mild slowdown (to a comfortable 80% in 11985) due to the Austral Plan: a heterodox attempt to reduce inflation by a combination of price, wage, and utility controls; de-indexation of contracts, and changing the currency from the embattled peso to the brand-new Austral, with a 1.1:1 exchange rate. Problems showed up when the government started being unable to control the economy (and to pay off its substantial internal debts with means other than printing money), and as the Austral quickly depreciated more and more; from that 1.1 exchange rate, it devalued by the hundreds in good months, and the tens of thousands in bad ones. By 1989, an election year, the economy had entered a bonafide hyperinflation of 5000% as the Austral devalued by 13,000%. The government party obviously lost reelection, and Peronist successor Carlos Menem reduced inflation to 0% (quite literally, in fact) by ditching the Austral and returning to the peso, which would have a 1:1 peg to the dollar. The dollar would also become legal tender, and indexation of contracts was strictly banned. Alongside massive fiscal reforms that reduced the deficit (temporarily, at least) inflation gradually disappeared, becoming a ghost by 1994.
This currency peg survived for a decade, until a massive crash of the economy in 2001 (which is a bit too complex to get into at the moment) forced the government to get rid of the peg in 2002. The original plan was to have the exchange rate jump to 1.4 pesos per dollar, but the free market had other ideas: to gain financial stability, the peso depreciated by nearly 400% - resulting in 40% inflation for the year, the highest in nearly a decade. The situation subsided in 2003, and the economy began recovering; the new President, the left wing Nestor Kirchner, had an economic vision that rested on a trade surplus, a high exchange rate, and balanced fiscal accounts. Inflation, first in the low and then the high single digits, began showing up again by 2005; while Treasury Minister Lavagna proposed cutting back on spending growth and monetary emission, the President objected and instead resorted to price controls; Lavagna resigned a few months later.
In 2007, after Kirchner had been succeeded by his wife a row between INDEC and Commerce Secretary Guillermo Moreno started brewing - inflation figures were higher than they were supposed to be in sight of some brand new price freezes in certain sectors. Moreno wanted the statistics agency to hand over data on which companies were raising prices, which was (and still is) illegal; INDEC refused, and the government retaliated by firing most of its career staff on certain key departments (mostly inflation and employment) and replacing them with more friendly figures, which started reporting data that agreed with the government’s vision of the economy.
Inflation steadily grew (or did it…) as Cristina Kirchner’s government adopted increasingly more reckless monetary and fiscal policies and started purging its economic staff of anyone with mildly reasonable ideas, to replace them with heterodox cranks. For example, in 2010 the President attempted to fire the highly respected President of the Central Bank, Martín Redrado; he refused to resign, claiming to having been appointed by the Senate to a full term. This devolved into a 3 month legal battle, where the courts finally sided with the banker; nevertheless, he resigned, and was replaced with the Mercedes Marco del Pont, who had… unusual ideas about inflation (mostly, that it was caused by market power and oligopolies flexing their muscle). The government pegged the exchange rate again, and imposed stringent currency controls (known as “the clasp”) to prevent leakage of US dollars. These measures hurt the trade result, and weakened the peso by creating a massive black market for speculators to sell US dollars above the official rate. In this era of recklessness, which saw large deficits funded mostly by emission, inflation ratcheted up to the high tens and then the twenties annually.
After the 2015 elections, where Kirchner’s preferred successor lost to the center right Mauricio Macri, the new government lifted these restrictions and devaluated the currency under a simple assumption: prices had been set using the parallel exchange rates (and not the lower official rate), so a devaluation wouldn’t substantially increase inflation. The government also made another miscalculation: highly regressive enregy subsidies made up about two third of the 6.6% fiscal deficit they inherited, so they assumed the massive lag in them wouldn’t really increase inflation - businesses could just swallow the cost without much guidance. These two glaring miscalculations made the inflation rate jump to 40.6% anually in 2016, the highest level since the 2002 devaluation. After the exchange market calmed down in 2017, inflation decreased by 15 points and stabilized at 25% for the year, netting the government a big win in the midterm elections. In 2018, after a few international shocks and decreasing trust that the government would actually do anything about the country’s finances, the peso began rapidly devaluing again, jumping from 17 to 45 in relation to the dollar in a couple months. Inflation spiraled out of control again, jumping to 46% annually. 2019 showed a similar dynamic: the Central Bank had massively increased interest rates, to the 60’s, to prevent inflation; the dollar stabilized from January onward, and the Presidential election was expected to be close. Macri had to fight tooth and nail Peronism’s new leader, the more moderate Alberto Fernandez; while pollsters expected the August Primaries to be close, their actual result was a blowout: the incumbent lost by 16 points and only won two out of 24 provinces. The market went into panic mode: the dollar jumped by a third literally overnight, and the stock and bond markets halved in value over the course of a week. Macri ultimately shrank his margin of defeat to a respectable 8 points, and the government handoff went smoothly-ish; inflation, which was already expected to be in the 30’s to 40’s, skyrocketed in August and September and reached 54% over the year, the highest figure since the 90’s.
Fernandez showcased his pragmatism by increasing controls on the currency markets, increasing some taxes, and freezing most pensions (the largest item in government spending by far). A combination of monetary stability and trust in the new President slowed inflation to the 2 to 3 percent monthly area, until March. In that month, since the government mandated one of the earliest and strictest lockdowns in the world, a perfect storm of plunging circulation (since nobody was buying as much), exchange rate stability, and price measurement fuzziness (as explained in the 1st paragraph) let the monthly inflation rate fall even further, to the high ones - their lowest since 2018.
This isn’t really a sustainable decrease, and is mostly temporary: a combination of no circulation of money, no demand for dollars (for once, actually buying them is quite the odyssey), widespread price controls, and utility freezes have repressed inflation (i.e. kicked iit down the line), not reduced it. Its future development will result from whether or not the peso is devalued (not devaluing it would gravely hurt trade results and attack the Central Bank’s balance sheet at its Achilles heel, international reserves - which have dropped by 1 billion dollars since April), how price restrictions are lifted, and monetary policy actions to revert the massive jump in the monetary base we have seen - almost a trillion pesos have been printed since March, and it has grown by 88% compared to last April.

A simple monetary-fiscal framework of inflation

The simplest theory we’ll be summarizing is the one laid forward in Philip Cagan’s “The monetary dynamics of hyperinflation” (1956) (link here). Cagan decided to look into governments that had had hyperinflations in the past, and look at which factors had most influenced that.
The main variable Cagan wanted to look at was the demand for real cash balances (i.e., the demand for money divided by the price level); the explanatory factor he found for why it changed during hyperinflations was that the price level increased much faster than the demand for money (no doy).
The first assumption comes here: Cagan claimed that the demand for money (which was equal to supply at all times) depended mostly on inflation expectations, i.e. what people expected prices to be like in the future; this relationship was such that when inflation expectations grew, monetary demand would drop. A key factor here is that this relation (which was a log equation but this isn’t a math class) was mediated by a factor, known as alpha, which set how reactive monetary demand actually is to changes in expectations; if it’s high, then people are easily spooked, and they get rid of their money really easily.
But, exactly, how do those expectations move around? Cagan saw that, even if inflation died down for a bit, real cash balances were still low; his reaction was to assume that inflation expectations change through time as a function of prediction errors, i.e., the difference between expected and real inflation. He simply multiplied that difference by a fixed coefficient, beta, which also measures “jumpiness” - so a really high beta means that a small prediction error has big consequences on the future rate of expectations, and therefore on future monetary demand (depending on alpha, of course).
Since this is a monetary-fiscal model, let’s talk spending. Governments on the brink of hyperinflation aren’t especially good borrowers, so they barely have any access to credit (if anything, they have large debts to pay off - more on this later). Since tax collection is dodgy and inflation comes with a few problems of its own (more on this, too, later), then they have a notorious deficit that can only be sustained by seigniorage (printing money). If the monetary base grows at a constant rate, such that the deficit is always funded, then this monetary base growth entails (for weird mathy reasons) a monetary base that coincides with it, and therefore levels of “expectations” where the deficit is fully funded and monetary supply equals monetary demand. In this case, the government funds its deficit through what’s known as the inflation tax: when spending is funded directly by printing new money that “owns” real goods, then the amount of goods hasn’t changed, but the amount of money has; therefore, its “value” (as in purchasing power) should be lower to properly express this (this is a gross oversimplification, and the answer only really makes sense through boring budget constraint math).
As all other taxes, the inflation tax has a rate (inflation) that people pay and a base (money) which pays it; and since it’s a tax (and now it’s time to make the succs mad) then it can safely be assumed to have a Laffer curve: there’s a quadratic relationship between tax collection (i.e. how large a deficit can be funded) and tax rates (how high the inflation rate is); this is because, since the inflation tax is on real cash balances, then higher inflation starts shrinking them at some point, so revenue is lower.
Assuming the deficit isn’t at the peak, then you have two equilibria for any given level of spending: one at which the inflation rate is lower, and one at which the inflation rate is high. Exactly which one of them the economy ends up in (which one is stable) depends on one thing: how “jumpy” agents are. If alpha and beta are very high, then any changes to monetary and fiscal policy will ripple across the economy, so everyone will suddenly drop a lot of their real cash balances expecting them to lose their value. This will obviously mean they do lose value, and inflation rises; therefore, only the high inflation equilibrium can be stable if alpha and beta are large (this is also proven by looking at the math). And in the opposite case, where people don’t go around dropping their life savings at any inconvenience, then the low inflation equilibrium is stable. This means that, for example, reducing the deficit or slowing monetary emission can only work if alpha and beta are small, so people don’t overreact in anticipation and blow it; as a result, if they are high, then inflation will actually increase (if you look at the graph, you see that a lower deficit means a lower “good” state and a higher “bad” state).
Obviously this shows that, for the notoriously volatile Argentinian economy, maybe tight monetary policy or fiscal austerity aren’t good fits… which kinda explains the Macri failure to lower inflation.
Thomas Sargent and Neil Wallace expanded this model in their 1973 paper “Rational Expectations and the Dynamics of Hyperinflation”. Their main idea was to re-express the system not, as Cagan did, assuming rational expectations, but by instead assuming perfect foresight- i.e., that nobody could be “surprised” by inflation, because every time a deal is made both participants settle on the price after reading the Central Bank balance sheet for a while. In this case, expected inflation always equals actual inflation, so expectations never change compared to inflation because expectations are always correct.
Without much of an effort to explain any other meaningful differences, it suffices to say the model is differently specified. A counterintuitive consequence of perfect foresight is that only the high inflation steady state is stable: if starting at the “good” state, then any disturbances would create a feedback loop where the government attempting to earn more (or less) revenue by increasing (or reducing) either the inflation tax rate or the monetary base results in the public catching on and counteracting, leading to the cycle repeating itself with inflation just piling on. At the bad state, the government fully funds its deficit once again and everyone remains where they are - so no matter how much perfectly rational agents react to changes in inflation, since those changes are never unexpected and always counteracted, the inflation rate cannot go down by surprising or “tricking” them.
This doesn’t have the clearest relation to Argentina’s inflation rate, but it does illustrate how inflation can be high even when everyone is perfectly aware of what’s happening in the economy.

Some Unpleasant Monetarist Arithmetic

Sargent and Wallace made another, much more notorious contribution to the literature on inflation: their famous 1981 paper titled “Some Unpleasant Monetarist Arithmetic”. Let’s imagine that the government actually does have access to debt - so it can, in fact, finance the deficit by either printing more money (which works as Cagan specified it) or by issuing debt. Assuming a single and constant interest rate (or various interest rates that remain constant nonetheless), what happens is that the Central Bank gains independence: since it doesn’t have to singlehandedly fund the government, it can also try to reduce inflation (or raise output, but we’re assuming that isn’t the main concern at the moment). This means that the government can’t choose how to fund its deficit - the actions of the Central Bank determine how much money it raises from the inflation tax, and therefore how much of the rest of the deficit must be financed through new debt. It could also be possible that the government has a very detailed fiscal plan, that determines how high the deficit would be and how much debt can be taken; the Central Bank then is “dominated” and has limited degrees of freedom around providing the required seigniorage.
Let’s dive into debt: it is very clear that countries can’t actually take infinite debt, but what’s trickier is to prove it; it can still be safe to assume that there comes a point where investors start having doubts that the government can actually pay off its debts; there’s also the fact that the public only has a limited demand for bonds (among other reasons, because people can’t just give up all their cash - grocery stores don’t accept Treasuries as payment). As a result, there comes a point where the government can’t actually issue more bonds to pay off its debt - and immediately thereafter, it has to increase printing to accommodate the entire deficit (plus interest and principal payments on debt, which will be ignored).
Let’s assume that the Central Bank wants to lower inflation using its limited independence - it decides that it will reduce the growth of the monetary base, which in either framework results in lower inflation due to lower seigniorage revenue to be “offset”. This means the government has to take more debt than usual; as a result, the tipping point for debt comes sooner. Once this happens, bond sales equal zero but the deficit is still constant, which means that there is a discrete jump in the stock of real balances to match it; as a result, the growth of the monetary base skyrockets from near zero in a very short period of time, which means that inflation actually increases as a result of the Central Bank’s policy change.
This has very clear implications: tight monetary policy can’t coexist with loose fiscal policy indefinitely. Someone tell that to Macri, because that is what he did: ignoring the devaluations and utility hikes, simply replacing seigniorage with debt (through raising the interest rate and therefore lowering the demand for money relative to bonds, which isn’t that relevant to this discussion) can’t work if the deficit remains constant - or even increases, since he also threw in some tax cuts in 2017.

Devaluations and inflation

The Macri era had three massive devaluations, all of which affected prices. Why? On the abstract, there are two reasons for this: increasing costs for sectors that require a lot of imports, and expectations (basically, people expect that a devaluation will increase inflation, so they protect themselves by… raising prices, therefore increasing inflation). The dynamics can properly be explained by looking at which assets people hold.
If you assume, in the first place, that people hold only domestic money and US dollars (or any other foreign currency), you can then divide the situation into two cases: one with a floating exchange rate (where the price of the US dollar is determined by the market) and one with a fixed rate (where it’s set by the government). This can be properly modeled with Flood & Garber (1984), where, in the floating rate scenario, agents change the composition of their asset portfolios: during a devaluation the real demand for money is reduced in favor of the demand for foreign currency, such that the price level increases since the inflationary tax has to do “extra work”, but for the same level of foreign currency, since sellers are scarcer than buyers.
Under a pegged rate, things get messy. If you look at the monetary base, it is divided between domestic credit, which is like the regular printed money from before, and international reserves (simply put, big stockpiles of US dollars the Central Bank owns). The pegged rate means that inflation via exchange rate factors disappears, so this lowers inflation (if pre existing inflation is low, then prices virtually don’t change); the problem is that it also means that to maintain the exchange rate, the Central Bank has to sell its reserves - no private agent will be incentivized to sell theirs. Clearly, sustainability becomes an issue: reserves can eventually run out, which means the Central Bank will have to devalue. At this point is where monetary expansion becomes an issue: assuming the monetary base grows at a constant rate, then decreasing reserves means that it eventually will contain only domestic credit, which is pumped into the general economy. This has an interesting implication: there exists one point at which the reserves equal an amount of money that speculators (or investors) have in their portfolios; therefore, a speculative attack may occur such that private actors buy out the Central Bank to force a devaluation.
All actors buy, under perfect foresight, at the exact same time (otherwise everyone else would have predicted someone who was “ahead” to make a big profit, so they all jump in to gain too, which means nobody gains); the perfect foresight implies that a devaluation won’t occur immediately (i.e., that the rate after the attack will equal the pegged rate) because all agents can simply wait until their dollars have their preferred value and sell them at that point. But the consequence this buyout does have is that inflation increases: the Central Bank faces a massive sudden cut in domestic credit, because a lot of money is being put out of circulation to buy the dollars, entailing an immediate discrete jump in inflation (later work by the same authors explains what happens if the Central Bank prints money to counteract - spoiler alert, the same thing but with bonds).
Since the Macri Presidency started at the tail end of an unsustainable pegged rate (net reserves, i.e. the ones that can be sold, were negative because the Central Bank had more debts than assets), the devaluation he undertook (from 9 to 15 pesos) worked as explained here - with the caveat that since Argentinians do not, in fact, possess perfect foresight (oh, the trouble we would have avoided), then the exchange rate actually jumped and impacted inflation nonetheless - which the new authorities didn’t actually expect, dumbly, further demolishing perfect foresight.

Conclusions

As we can see, even the economically orthodox Macri administration wasn’t particularly good on orthodox theories of inflation. A combination of neglecting fiscal policy and not taking adequate precautions to prevent a currency run made their hard monetary policy useless at containing inflation sustainably, and once the currency run actually happened (mostly due to international factors + a drought) then investors stampeded out of the country out of mistrust in various occasions, resulting in both cost inflation, inertia (i.e. inflation impacting future contracts), and warped expectations. Inflation does have costs on output (one example) and on consumption, so this put the economy into a fragile and precarious situation, which led to a two-year long depression and to Macri himself losing his position, with few tears shed by long-suffering Argentinians.
Now, to the populist Fernández administration: he has massively tightened currency controls, excessively, and has doubled the monetary base, from 1 to 2 trillion pesos, over a three month period. The fact that there’s a lockdown is currently containing inflation: a combination of price controls on telecommunications, rent, and basic goods means most prices are frozen, and people are too focused on the day to day to demand anything that isn’t money. International reserves are at their lowest level in three years and agriculture, the golden goose of the trade surplus, has reduced sales by almost a fifth since export taxes make selling unprofitable at the current exchange rate. The fiscal deficit, meanwhile, has been engorged by emergency spending and is currently only being funded by seigniorage as the country is mired in a complex debt restructuring.
This scheme is obviously unsustainable in any term other than the shortest imaginable; the Central Bank, which has massively lowered interest rates (well into the negative double digit real rates) should raise them to a low, positive level to promote saving and to vacuum up that excess trillion that could go run on the currency at any time. The path to sustainability is threefold: a sensible fiscal framework that promotes credibility, consolidates a local debt market, and ensures an elimination of seigniorage (permanently and sustainably, not… Macrily); an independent, reasonable Central Bank that uses positive rates to promote saving while not deterring investment, and a competitive but stable exchange rate that maintains a balanced trade result to provide the economy with the foreign currency it demands while not burning out the Central Bank or inflation.
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test0

Welcome to another edition of my EffortPost Series, preview of a possible Second Coup Attempt in Venezuela
Venezuela's Regime have suffered a massive decrease in revenue sources over the last 5 years. On 2019, SENIAT informed contributions from Wealth Taxes, IVA and other associated Tax Incomes closed near 30 trillion Boliviars
Due to Venezuelan hyperinflation, translate Bolivars into dollars is not an easy task. But, in average, each month Venezuela reports 140 million dollars on Tax Revenue
With a yearly income of ~1.7 Billion dollars, their annual budget of 4.5 Billion dollars looks suspicious. But it could easly be explained by Inorganic Bolivars entering the market. At cost of Mass Hyperinflation, they manage to sustain their Government for another couple of months
But overseas, that trick won’t fly. No one outised Venezuela will take those Bolivars regardless of what Maduro has to say. So they gotta have a reliable source of dollars to pay for their imports, debts and bribes
So…Where are all those dollars coming from?
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PART 1.1 OIL EXPORTS

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Let's start with the most obvious source of Income: Oil. Almost 95% of legal Venezuelan exports are oil related, being also the biggest (legal) source of revenue for the Regime
But...How much profits PDVSA really produces?
According to Reuters*, PDVSA made over 106 Billions dollars in 2012. By 2018, and following a sharp decline in global prices, that figure dropped to 21 Billions
In 2019, both the USA and Lima's Group initiated economic sanctions on Venezuela in attempt to oust Maduro
Sanctions have been the Bane of Maduro's Regime. On top of their already lackluster revenue, restrictions pushed away many of their trading partners, to point a PDVSA was forced to add discounts on their Oil Barrells*, in an attempt keep their allies from leaving them. According to Reuters insiders, those discounts could go as high as 50%* of the real Barrel value
Production costs in Venezuela are state secret, making the royalties PDVSA produces to the State a mystery. Reuters informant were told the cost went from $10 to $12 per barrel, excluding a 33% royalty PDVSA pays to the government. It's unclear if those cost include trading those barrels Some experts say PDVSA becomes profitable at 18$ per barrel*. On 2016, PDVSA itself reported the profit margin started a 23$
A couple of days ago, Maduro recognized they wouldn’t make any profit if prices go lower than 28$ per barrel*. Weather this is true or not, it's hard to say. But analyst estimate the expected revenue coming from PDVSA to the State will decrease to a mere 4.5 Billons with the barrel on 25$*
Profits coming from PDVSA : ~4.5 Billion Dollars
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PART 1.2 ILLEGAL GOLD MINING

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Illegal Gold mining in Amazonas have turned into the second source of income for Venezuela State. It's reported 91% of Gold extracted in Venezuela is not produced legally*. According to Lima's Group, it's the biggest Ecocide the Amazon is facing right now Gold coming from violent extraction is "washed" and melted with legal gold, then passed off as 'bleached' to the vaults of state or private banks*. This process is mostly coordinated by two groups: Guerrillas in the Amazons and the Central Bank of Venezuela, that (allegedly) does most of the money laundering
This profitable crime has recently become more dangerous, as result of International pressure. Attempts to catch illegal mining trade across the borders have increased, causing millions of dollars in lost revenue with each new confiscation
• How much profits Illegal Mining produces?
In 2019, Government expected to receive 5 billion dollars from Gold Mining in 2019 (It's unclear if this occurred or not). Congress, on the other hand, reports this number is closer 1.8 Billion. This seems to be in line with the number reported by the Government in 2018, when Venezuela announced 2 Billion dollars in royalties from Gold extraction
Profits coming from Gold extraction: ~2 Billion Dollars
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PART 1.3 DRUG TRAFFIC

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Biggest fully Illegal source of revenue for Venezuela's Government. The Government officials involved in this scheme are part of the Cartel de los Soles*
“There are indications that in the Bolivarian Republic of Venezuela, criminal groups have succeeded in infiltrating government security forces, forming an informal network known as the ‘Cartel of the Suns’ to facilitate the passage of illicit drugs into and out the country,” indicated the report of InSight Crime on February 27, 2020
The amount of revenue coming from drug traffic taxes is unclear. The closer numbers I could find was a 2017 USA report about money laundering in the Alba Coalition rising to ~2 Billion dollars across the whole Region
Similar to Gold mining, International enemies of Maduro have drastically increased their confiscations of Drugs near the Caribbe, in an attempt to stop Cartel de los Soles main source of revenue. USA's South Command is now deployed near Venezuela, taking all chances they get to capture narcotics exports
• How much of that revenue actually goes to the Venezuelan State?
It's fair to say Gangs pay a tariffs to operate in Venezuela, but how much of those tariffs goes to Tax Payer money is impossible to find. Most likely, most of that revenue stays within the Military officers and members of the Government
Profits coming from Drug Traffic: Unclear. Most likely, less than ~2 Billions
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PART 1.4 PDVSA ASSETS

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Soft-Privatization of PDVSA is certainly a controversial topic. But, given the current circumstances, seems to be the last source of revenue possible to sustain the Venezuelan boat afloat
Recently, the Government announced a re-structure of the Oil Company. According to worldoil.com, the plan is cut in half PDVSA’s 24 affiliates, including construction and farming projects. Foreign offices and assets in Ecuador, Bolivia, Uruguay, Paraguay and Argentina are to be sold, leaving only some existing branches in the Caribbean and the U.S. Plus, International partners at nearly half of 46 joint ventures will take majority control*
With PDVSA-only operated fields opening to foreign investment, more investments could come to country. But, as shown by the Russian company Rosneft, companies willing to cooperate with Venezuela are subject to USA sanctions. Just last week, the Swedish refinery Nynas announced PDVSA sold their majority in shares to avoid USA Sanctions*. Even the Oil giant Rosneft, had to stop their Direct transactions with PDVSA to avoid economic pressure coming from the White House
• How much PDVSA assets produce?
In theory, the Oil Company have massive amounts of assets on his disposal. In practice, situation is far more complicate than that.
The amount of Debt piling up in PDVSA have go trough the roof in the past decade*, and both Investors and Banks are seeking to seize Venezuela assets in compensation to their unpaid debts * To keep PDVSA functioning, Maduro had to find a way to pay off some of their Debt to key investors. It's my educated guess, their way of paying up, is selling their Oil Company assets across the World and (in the future) privatize PDVSA
(Privatize PDVSA itself has a key problem though…But I am going to leave that topic for another post)
Profits coming from PDVSA assets: Unclear. Shares might be sold as Debt payment to Key economic partners
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PART 1.5 CENTRAL BANK OF VENEZUELA

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The International Reserves of the Central Bank of Venezuela are a key player in Maduro's Regime. It deserves its own post, so I will leave this part for another day...
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The Argentinian Presidential Election, explained

What’s going on in Argentina?

Today, on October 27th, Argentina held its eight Presidential Election since 1983 (when the country left a 53 year period of political instability, violence, and coups) to elect a President, half the House of Deputies (allocated in proportion to each province’s population) and a third or the Senate (7 provinces and the City of Buenos Aires, the autonomous capital, elect 3 Senators each). Four provinces (Catamarca, the Province of Buenos Aires, La Rioja, and the City of Buenos Aires) are also electing their governors, with the Province of Buenos Aires being a must win territory for any government.
While Deputies are allocated proportionately, and Senators are divided between the two largest parties (2 for the winning ticket and 1 for the runner up), the Presidential vote is handled differently. The President is elected by a popular vote, where instead of requiring a 50% majority, a candidate must get 45% of the vote or 40% and a 10 point lead to the runner up in order to win; otherwise, a runoff election between the top two candidates must be held.
In August, the country held its Mandatory, Open and Simultaneous Primaries (PASO in Spanish), where all registered voters go to the polls and choose candidates for a variety of offices in both elected branches and in every jurisdiction; no party had unsettled candidacies for the majority of elections, though.
When the results came in, three hours later than expected, the whole country was in shock: while the polls had predicted President Mauricio Macri and his main rival, Alberto Fernández, to be virtually tied, Fernández won in a 16 point landslide and got enough votes to win without a runoff election (48,8% to Macri’s 32,1%).
The main reason Fernández won so decisively was the economy: Argentina has been in a severe recession since 2018, with dismal indicators: poverty reached 35%, inflation is projected to reach 57% and GDP to drop 3%, while the US dollar reached a record value of 64 pesos, compared to around 20 in April of 2018. I wrote a post here about the reasons for this severe crisis, so I won’t go into much detail about it.
I will detail who the Presidential candidates are, their platforms, and whether or not they have a real shot; also, I will mention some must watch provincial races; and finally, I will go into some detail about the challenges the next administration will face. Since there are 6 candidates, but only 3 have a real shot to win the election, I will focus on them over the rest.

Mauricio Macri: let’s change

Mauricio Macri is the 60 year old President of Argentina. He is the son of the late Franco Macri, a multimillonaire construction mogul, and had a privileged upbringing, attending a number of elite private schools. He became President of Boca Juniors soccer club, one of Argentina’s biggest teams, in 1995; in 2003, he decided to run for mayor of the City of Buenos Aires, and he was narrowly defeated. In 2007 he ran again, where he was elected with 60% of the vote in the runoff election. As mayor he served two terms, and mostly focused on infrastructure, administrative reform, and some investment in public services.
In 2015 Macri began a Presidential campaign, on a coalition known as Cambiemos, or “Let’s Change” in Spanish; besides his own party, Republican Proposal (known as Pro), he joined forces with Elisa “Lilita” Carrio’s Civic Coalition (a centrist, mostly conservative party which focuses on corruption, safety, and republican values), and the Radical Civic Union (UCR in Spanish, the country’s oldest political party with a centrist, liberal, social democratic ideology). He defeated the government’s candidate, Governor of Buenos Aires and former boat racer Daniel Scioli, 52 to 48% despite losing the first round of voting by three points, 34 to 37%.
His administration focused on three big issues: reforming the economy in a market-friendly manner (including opening the country to international trade and investment), impriving the quality of institutions and modernising bureaucracy, and big infrastructure projects.
Before his tenure started, the exchange rate with the dollar had been artificially frozen for a couple of years, while Central Bank reserves plunged; several price controls had been established (most notably on public utilities and transportation), and the country had not grown for two straight years since 2009.In his first year in office, he decided to deregulate the exchange market, create a pension plan for retirees who hadn’t contributed to Social Security, and slash subsidies for utilities, which massively increased prices and proved extremely unpopular with the majority of voters, despite them mostly benefitting the top 20%; he also had the country settle its debts with international creditors. Later, he reformed the pension system, with a new system to adjust pensions with regard to inflation; 2017 was the high point of his presidency, with poverty falling to a historic low of 25%.
One of Macri´s main goals was reducing the deficit: in 2015, it stood at almost 4% of GDP. Reforming the public sector and its role in the economy overall was key, and he slow-footed it during his entire term; this was a major mistake since the country’s anemic growth, high poverty, and other maladies stemmed (at least partially) from inflation, which was caused in the first place by long-term mismanagement of both fiscal and monetary policy.
There’s an ongoing debate amognst economists about the precise causes of the 2018 crisis: Macri’s first Central Bank President, Federico Sturzenegger, blames the big disconnect between monetary and fiscal policy: according to himself, he implemented a successful plan of inflation targeting whose credibility was demolished by the government not tackling the deficit (based on this lecture he gave at the Brookings Institution), who was later criticised by Harvard economist Rafael Di Tella for major design flaws in his own programs (Spanish language summary here). The other big issue of 2018 was a bill to legalise abortion: despite Macri himself being pro-life, he decided to allow Congress to debate the issue, unlike his more liberal predecessors. The bill ultimately died in the Senate after narrowly passing the House of Deputies, but it also energised the debate over abortion, sexual education, and feminism, which started after 2015’s Ni Una Menos (“Not One Fewer”) marches against violence against women and to bolster women’s rights.
Macri’s platform for 2019 is mostly a continuation of his current policies: he supports international trade deals, including the one currently being negotiated with the EU; inserting the country into the liberal international order in matters of foreign policy, structural reforms to the economy (including labor and tax reform), and defending democratic institutions against corruption and abuses of power. His chances of winning the election are incredibly slim, since his big loss to Alberto Fernández is nearly insurmountable; if he forces his way to a runoff, it’s hard to tell what could happen then.
Macri’s running mate is moderate Peronist Senator Miguel Angel Pichetto, the widely respected Minority Leader with deep political connections; he became an extremely controversial figure during the election, due to his incendiary comments comparing each and every one of his opponents to the Maduro regime and also calling them communists.

Alberto Fernández: get Argentina back on its feet

Alberto Fernández is a 60 law professor and former political operative running for President for a Peronist agglomeration known as Frente de Todos (“Everybody’s Front”). He served as President Néstor and Cristina Kirchner’s Chief of Staff from 2003 to 2008, when he left the position when Cristina had a major confrontation with food producers and rural workers. He became a major critic of Cristina Kirchner’s government for the past decade, during which he held no political office and became a Criminal Law professor.
Fernández has been a lifelong supporter of Peronism, an ideology founded by former President Juan Domingo Perón, which centers around a strong government, a well developed industrial sector, economic protectionism, state intervention in the economy, and non-alignment in foreign policy. Peronism has been the most influential ideology in Argentinian history, so a brief (-ish) history lesson is in order. Perón served as President from 1946 to 1955 and later from 1973 to his death the next year. His policies favoured workers and national industries, forging deep bonds with labour unions and some businessmen; his economics were a mixed bag, boosting equality and reducing poverty but ultimately leading to high inflation and scarcity of staple goods at the end of both his terms.
Peronists lost the 1983 election, the first held since Perón’s third wife and successor María Estela Martínez was deposed in 1983; President Alfonsín, of UCR, had to face structural problems in the economy, including a bout of hyperinflation at the end of his term that forced him to relinquish power earlier. His successor was Peronist Governor of La Rioja Carlos Saúl Menem, who campaigned as a populist promising higher wages and a productive revolution, but carried out some spending cuts, privatisations, and opened the country to trade and investments, plus a stable “1 to 1” peg to the US dollar. His reforms were limited and flawed, with massive corruption and numerous abuses of power (including packing the Supreme Court) happening under his watch. He was replaced by moderate UCR Mayor of Buenos Aires (the first directly elected, as decided in the 1994 Constitutional Reform) Fernando De La Rúa, who struggled to carry out unpopular reforms and was ousted by popular pressure after the economy collapsed in 2001. Since his vice President had resigned over corruption scandals, he was replaced with a series of acting Peronist Presidents, ultimately settling on Eduardo Duhalde, who devalued the currency and increased spending under Secretary of the Treasury Roberto Lavagna.
In 2003, Néstor Kirchner, a little known Governor of the southern Santa Cruz province, was elected President after Menem dropped out before the runoff; he espoused a more modern brand of Peronism (now known as Kirchnerism), which combined the old economic recipes with a higher regard of human rights and more emphasis on progressive social values. He served only one term, with Alberto Fernández serving as his Chief of Staff, and was replaced by his wife Cristina Fernández de Kirchner (known to most Argentinians as just Cristina or by her initials, CFK). She continued her husband’s policies and expanded them, increasing welfare spending, and taxes; she had an infamous confrontation with the agricultural sector over export taxes, which led to Alberto's resignation. She had a somewhat authoirtarian attitude with regard to the courts: she tried to pack them with recess appointments and reforming the non partisan institution that picks judges so its members were all politicians, both of which were blocked by the Supreme Court. Her relationship with the media was also fraught: one of her political slogans was “Clarín lies”, directed at a newspaper critical of her. CFK and many of her closest associates have been accused of rampant corruption, with many of them being convicted and others, including herself, being indicted and/or awaiting trial in numerous charges.
Cristina Kirchner herself is Fernández’s running mate, which cleared the field of other potential candidates and helped unify the party; this handed him her considerable base, since the former President enjoys wide support from working-class Argentinians. They have mostly ran against Macri’s economy and have supported many progressive causes, especially abortion (and a vague stance on legalising marijuana). A big question for the markets, and most Argentinians, is what kind of President Alberto Fernández will be: will he take the populist, interventionist measures demanded by the party’s left wing, or will he stay on the market friendly course businesses and international institutions (notably the IMF, which gave Macri a 57 billion dollar loan last year)?.
Fernández has indicated he will renegotiate debts without defaulting (a proposal emanating from the far left), will boost small businesses and cut taxes on employers to boost employment, and will create new welfare programs to ease poverty and end hunger. These programs clash with his promises of balanced budgets and low inflation, which will be the major issue of a possible Fernández administration.
The biggest issue regarding Alberto himself is the deep uncertainty about his priorities and policies, leading to a panic after his landslide and a run on the peso, combined with a catastrophic plunge in the stock and bond markets.

Roberto Lavagna: I know how to do this

Roberto Lavagna is the 77 year old candidate for “Consenso Federal” (Federal Consensus), a moderate Peronist faction. He is an economist and served as Secretary of the Treasury under Eduardo Duhalde and Néstor Kirchner, a role in which he was widely praised as the mastermind behind Argentina’s recovery from the ruinous 2001 crisis. He ran for President in 2007, coming in third with 17% of the vote, and didn’t hold any office since. His running mate is another moderate Peronist, Governor of Salta Juan Manuel Urtubey, who is staunchly conservative and was something of an ally of Macri’s during his term.
Lavagna is running on a platform similar to Fernandez’s, emphasising his experience in the Cabinet; he includes new spending to boost job creation, more welfare, but he considers labor reform and some new trade deals fundamental to the next term (unlike Fernández). Lavagna doesn’t have much of a chance, only getting 7% of the vote in the primaries, but is the strongest contender besides the other two.

The rest of the pack: Del Caño, Espert, Gómez Centurión

The other 3 candidates are more ideological, filling in niches in the political spectrum and getting about 2% of the vote each.
First up is leftist Nicolás Del Caño, a 39 year old socialist activist who is running on a platform of progressive social policies (legalising abortion, legalising weed, soft on crime, etc.) and a far-left economic platform, mostly consisting on defaulting on the national debt and nationalising various sectors of the economy (energy, oil, pharmaceutics, healtchare, etc.). He’s popular with the youth, and has already run for President in 2015.
Then we have libertarian economist José Luis Espert, a 57 year old wirter and economics professor; his platform consists of massive efforts to deregulate and privatise the economy, with lower taxes and various pro-market reforms sprinkled in. His social policies are deeply problematic and inconsistent, since he claims to be pro-choice and supports sexual education, but on the other hand he’s espoused tough on crime policies and condemned the “human rights racket”. He also proposes ending welfare.
Finally, there’s 61 year old war veteran Juan José Gómez Centurión, a far right conservative running mostly on his pro life, deeply conservative values and economic policies similar to Espert’s.

Results and what comes next?

With 92% of votes counted, it seems Alberto Fernández will be our next President; he kept his 47% of the vote, but Macri surged 9 points and narrowed the gap to just 6%, getting 41% of the national vote. Macri also went from losing every province except his home City of Buenos Aires and Córdoba, to also beating Alberto in Santa Fe, Mendoza, Entre Ríos, and San Luis; his victory in Córdoba was an astounding 61% of the vote.
Alberto Fernández will have to grapple with the highly unstable economy left by Mauricio Macri, facing sky-high inflation (probably from 55 to 60%), poverty nearing 40%, a high debt burden of over 100% of GDP (which he will have to renegotiate), and a severe shortage of US reserves. It will be a big task, which requires a deeply pragmatic leader willing to make concessions, which Alberto has given no indication of being (and not being, because he’s an enigma). How much he can accomplish will be decided by the size of his victory: if he approaches 55%, there’s a high chance he takes a majority of both Houses of Congress, giving him ample wiggle room to push for his desired policy outcomes; any less will require compromise and negotiation with other parties, more likely than any Macri’s Juntos Por El Cambio (Together for Change).

Races to watch:

Besides from the pretty predictable Presidential election, there are two gubernatorial races worth keeping an eye on. The first one is the Buenos Aires Governor, where “macrista” incumbent María Eugenia Vidal was trounced in the primaries by 19 points by heterodox economist, former Treasury Secretary, and diehard Kirchner supporter Axel Kicillof. Kicillof is poised to win with a majority of the vote, giving Fernández a solid break, since almost 40% of the electorate lives on this province, and controlling it is a must for any successful administration; Vidal herself probably won because her 2015 opponent, Aníbal Fernández (no relation to either Alberto or Cristina) was a widely reviled hatchet man, with a penchant for aggressive gaffes and alleged ties to drug traffickers (he’s also nicknamed “The Walrus” for his hideous mustache). This result was mostly repeated, with Vidal gainign about 6% yet still losing by a healthy 15 point margin, boosting Fernández's ability to govern.
The other interesting race is the Mayor of Buenos Aires election (the mayor has the same rank as a governor, and the city has full representation in both Houses of Congress). Macri’s successor, Horacio Rodríguez Larreta, is widely liked and seen as competent, with big and ambitious infrastructure projects completed during his term. The party hasn’t lost power to Peronism in the city for the past 12 years, and Peronists only ever won the Presidential vote once, in 2015; in spite of this, Larreta is playing it safe, distancing himself from Macri and attempting to win a 50% majority and avoid a runoff. His main opponent is soccer club president Matías Lammens, a young and inexperienced politician with a progressive agenda. He is widely seen as less competent and not experienced enough, which massively hurt his chances after a series of gaffes and errors he made in the mayoral debates. Coming into the election, Larreta had the upper hand, after getting a majority in the primaries with a 17 point margin of victory; the problem is that, unusually, almost 9% of votes were blank, which might endanger his reelection bid. The election won't come to a runoff: Larreta beat Lammens by a 50 point margin, 55 to 35%.
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¡El servicio de Margin Trading ya está disponible!

¡El servicio de Margin Trading ya está disponible!
Nos complace anunciar el lanzamiento de nuestro servicio de comercio de margen. A través del servicio Margin Trading, los operadores podrán utilizar los fondos proporcionados por otros usuarios en KuCoin para obtener acceso a grandes sumas de capital, lo que les permitirá aprovechar las posiciones. El comercio de márgenes es posible en KuCoin por los operadores que proporcionan los fondos y están ganando intereses en función de la demanda del mercado para estos fondos de margen.
Lea más sobre esta noticia en: https://www.kucoin.com/news/en-the-margin-trading-service-is-now-available/?utm_source=tftj
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Weekly Update: Welcome HYDRO to ParJar, Parachute newsletter signup, MatchBX Gigs, Wysker Series and Continuous Wyskering... - 22 Mar - 28 Mar'19

Weekly Update: Welcome HYDRO to ParJar, Parachute newsletter signup, MatchBX Gigs, Wysker Series and Continuous Wyskering... - 22 Mar - 28 Mar'19
Good day everyone! Here’s another update for the whirlwind week we had at Parachute and Parachute/ParJar partners. IRL work keeps me from churning these out on time. Working on catching up quickly to try to post future weekly updates faster:

A cool new community started to interact with ParJar this week. HYDRO was added to ParJar and ParJar added to the Hydro group. Fantom did a shoutout and CoinPedia also tweeted about ParJar. Thank you guys! Which makes me think, if this shoutout of the shoutout to our original shoutout is shoutouted by Fantom again, would it be a shoutoutception? Hmm. Also, we had our quirkiest game in ParJar yet. Parachuters had to use this site to find the most bizarre item. Best ones would win some cool PAR. Haha! The top picks were from Patri cko, Cryptovan and Clinton.
New Wonders of the World circa 2019
There’s a new email signup link for folks new to Parachute. If you’re not receiving Cap’s emails, you can sign up there. Close to USD 600 has already been raised for the Charity Parena. Woot! To get in, make a small donation (min USD 5 or crypto equivalent directly and let Jason know or tip Clinton through ParJar) and get a chance to win a 1-of-a-kind shirt from the Parachute Shop! Plus, kiddie gear is now available in the Parachute Shop. All profits from the shop go to charity. Games Master Jason turned 34 this week. Belated Happy Birthday to ya Florida Man! We had uber fun with an accidental Cap discovery this week. Add your favorite number at the end of the following link to jump to any chat in the group. For example the following link takes you to the first ever message in Parachute. Awesome!
Three Good Bois are counting on you to sign up for the Parachute newsletter
The 2gether card was launched on 27th March for use across the Eurozone. The presale event is now listed on ICObench. Make sure to check out the BCT ANN. Admins on their TG are rewarding members with 2GB who make thoughtful posts there. 2gether has an opening for a Java Software Engineer. Have a look at their job listing and apply if you have what it takes! Spanish speakers are in for a treat this week: Cointelegraph discussed about the company in a write-up, founder Salvador’s article on the zero marginal cost concept was featured in a UNIR publication and CEO Ramon’s interview during a Madrid Stock Exchange visit also came out. The 2GT token will be issued as a Virtual Financial Asset (VFA) in Malta. Read more about it here.
2gether is the only one with a regulated token
Still figuring out how to deploy your trading algo to your Binance account? Here’s a detailed look on how to set up your API keys and deploying a strategy to live markets on Binance using the Cryzen Code Studio. Also, belated birthday wishes to Shuvro. Hope you had a great one! Folks who haven’t subscribed to the Cryzen YouTube yet, subscribe now. They now have a custom handle. Community member Jonny did a little Cryzen shoutout towards the end of his detailed Crypto Asset Prediction Series. This week’s Saturday Rock Wars at PurpleCoin was for the best guitarist of all time. Jimi Hendrix won the public vote by a whopping margin. BOMB token is looking for ambassadors who can bring “liquidity, awareness, and education to the project”. Learn more about it here. Checked out Wysker Series yet? These are listicles of bundled relevant content aimed at user growth. Design geeks will find it fascinating. Plus, the app will see a new feature soon called Continuous Wyskering. Jonathan says: “After finishing one story, users will no longer have to go back to the home screen to discover new stories. Instead, the next story in line can be accessed with a simple swipe.” Neat! And finally, Birdchain has partnered with Blocklads to bring educational content to the app's learn tab. Look out for new content in that section!
Shuvro’s ETC bot showing decent gainz
Gigs are now live on MatchBX. Freelancers can create listings for their services directly and job posters can directly hire freelancers from there. Win win! If you’re not sure of what MatchBX is, read up on it here. Plus, the weekly AXPR burn went on as scheduled. Bounty0x crossed 500k+ monthly page views this week with a ~30% return visitor rate. If you’ve participated in a Cures Token bounty on Bounty0x, this article is super relevant. Also, KABN partnered with Bounty0x this week for running promotional bounties for their token offering. The ETHOS token is now listed on the ChangeNOW exchange. Much has been said about the Voyager-ETHOS deal so far. Shingo explains in this article why the partnership will be “setting new standards of transparency”. District0x’s weekly update covers a range of topics including Brady’s interview with A Garden of Crypto on all things District0x.
AXPR tokenomics
Altcoin Buzz featured Opacity this week and talked about their current development roadmap which includes the 1.0 site launch (which was also this week). Check out opacity.io for a look and feel of what’s in store for May. Badcredit wrote about Horizon State with a detailed piece. The Minister’s Recreational Fishing Advisory Council was announced this week as well. “The voting process has been transparent and historic - for the first time in South Australian Government history, Blockchain technology was used for the voting process." Big up to Horizon State for becoming a part of history! And finally, they closed off the week with a bang by getting listed on CoinExchange.io. John McAfee talks about Switch around the 11 minute mark in this interview with Satoshi Sean. Blockport was the centrepiece of this Coinvision article that explains the ins and outs of both the exchange as well as the BPT/BPS tokens. The Blockport STO is set for April 15th with more details in this post. If you’re interested and live in the EU or the US, the whitelist procedure is explained here. And finally, onto some Fantom news. Coinspeaker elaborates what the myriad partnerships mean for Fantom in this article. Like last week, Fantom capped off this week too with another exchange listing – ChainX. Boom!

Thank you for taking the time. See you soon with another weekly update. Cheerio!
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WHAT IS MARGIN, & HOW TO CALCULATE MARGIN FOR INTRADAY TRADING. ¿Qué es un Margin Call? What is Margin Trading?  Fidelity - YouTube Understanding Margin Trading Accounts - Initial & Intraday Margin Que es el margin trading Bitmex vs Bitfinex

Cuando este margen es sobrepasado por mínimo un 50% de su cantidad, el bróker emitirá la margin call, advirtiendo al bróker de aumentar dicho margen en trading o movilizar la operación para que no siga perdiendo. Si esto no sucede el bróker cerrará la operación tempestivamente para evitar que siga decayendo el precio. Margin is the money borrowed from a broker to purchase an investment and is the difference between the total value of investment and the loan amount. El Margin Trading es un tema cuestionable. Algunos traders consideran que el trading con margen es muy peligroso, otros, como los especuladores de divisas, lo encuentran particularmente útil para operar con estrategias a corto plazo que pueden pagar con una pequeña inversión inicial. Todo depende de tu experiencia de trading y tus objetivos. Margin Rate Definition. Margin Rate is the interest rate that a broker charges for buying securities on margin, i.e. for purchasing securities with borrowed money. Margin itself is the deposit needed in order to open a position with a broker, when the trader wants to use leverage. Qué es y cómo usar Margin Trading. 02/07/2020; Herramientas Financieras, Margin Trading ¿Querés ganar más con tu inversión? Te contamos en dos simples videos de qué hablamos cuando decimos Margin Trading o Apalancamiento. Mirá este video 😉 Qué significa Margin Trading – Te contamos acá

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WHAT IS MARGIN, & HOW TO CALCULATE MARGIN FOR INTRADAY TRADING.

Margin trading, leverage o apalancamiento te permite ganar más dinero con tus operaciones sin la necesidad de contar con un gran capital. ... Que es el margin trading Bitmex vs Bitfinex ... Have you always wondered what it means to trade on margin? In this video, you’ll learn what margin trading is and if it is a strategy that could help you ach... Trading 101: What is a Margin Account? - Duration: 11:14. ClayTrader 164,692 views. ... Whats the Best $500 Margin Es Futures Broker - Duration: 25:17. DayTraderRockStar 8,607 views. Avoid Margin Trading - Secret of Intraday Trading Success (Hindi) - Duration: 16:59. Nitin Bhatia 262,312 views. 16:59. Demand and supply trading strategy basic overview - Duration: 18:32. [email protected] a este video donde te explico cuáles son las diferencias entre una Cuenta Cash y una Cuenta Margin. Si estás empezando en TRADING o si ya llevas un camino recorrido, es importante que ...

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