Maybe Hippos exchange rate games aren't so dumb?

Adrian Bye

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Remember that a LARGE amount of USD is coming into the country this month.. If the rate goes down to 30 even for a few weeks, he'll get a 25% discount on all the USD they bring in.
 

arturo

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Mar 14, 2002
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you and he are right, but only for a few weeks

That's the catch - what Hipolito and his cronies have wrought is no more than a short term (as in 3 to 5 weeks) fix. As the dollar supply inevitably shrinks, the value of this ploy will decrease proportionally.

There will be a bit of a sling shot effect and the peso will drop like a rock as the combined forces of waning seasonal tourism and maturing foreign debt shrink the dollar supply. If Hipolito turns desparate and prints more pesos, well, see Thailand, Argentina, 1980s Peru, and many others for a road map to economic disaster.
 

gringo in dr

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It doesn't matter if the exchange rate is 1:1 or 100:1. The USD value stays the same.

Hipo's plan of artificially raising the value of the peso will have the same effect that happened with the german economy after WWI. They decided to just print more money. In the end people needed wheel barrels full of cash just to buy some groceries.
 

lhtown

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Hold that thought... I am going out to buy a couple of wheelbarrows.

OK, I'm back. Anyone want to raise some venture capital to start a wheelbarrow factory?
 

GringoCArlos

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Jan 9, 2002
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The value of the dollar always stays the same, gringo in dr????

Last time I checked, the dollar has lost 30% against the Euro in the past 1.5 years.

The smart money has been changing pesos for Euros, not dollars. You get an immediate 10 % pop because the exchange rate in the DR is artificially low , and you don't lose money as the dollar continues to sink.

Alan Greenspan has a hell of a lot more printing presses than Hipolito does, and they are ROLLING.
 

gringo in dr

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I've mentioned that before, but that is an even harder point to explain to some people.

The USD has been dropping. The fact is the peso is dropping so much faster than the USD.

Most of the papers here report the dollar is going up. Explaining the truth to locals isn't easy.
 

Adrian Bye

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The point of this is, with the drop in the exchange rate for THIS MONTH, the DR is getting a significant benefit.

How much USD arrives here this month? I wouldn't be surprised if 1/3 of the amount for the entire year comes just in December.

Thus a short term drop in the exchange rate IS significant.
 

Eddy

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Locals have the opportunity of a lifetime. Buy all the US$ you can at 30. Personally I hope it goes to 25.
 

gringo in dr

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The locals that have spare cash already have it in USD.

I doubt there will be much USD available for sale as the exchange is artifically moved down. The banks and exchange houses would be loosing a ton of money if they do sell large amounts of USD.
 

Pib

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gringo in dr

That's exactly what everybody is saying (the president of the newly-renamed Banco Leon among others). To paraphrase him, "it doesn't matter how low the exchange rate is if people can't buy any dollars". Diario Libre surveyed the market and found that a) the rate has stabilized at about 39-40 and b) there are not dollars available for purchase and sellers are scarce.

As my husband says Hipolito's ideas are "interesting, but stupid".
 

Cleef

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Feb 24, 2002
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Joke

"What did the peso say to Hippo when told to get below 40?"
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........ "go eat yuca you dipshit monkey "

b'da bummp!

As my husband says Hipolito's ideas are "interesting, but stupid".]

I love that.

I mentioned in another thread that I saw huge withdrawals from Seguros Popular on Churchill. 10's of thousands of dollars and millions in pesos. I've never seen anything like that.

To w/d in US it took me nearly an hour and a half.

Holiday or Politicoeconomico related? I haven't a clue.
 

simpson Homer

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Nov 14, 2003
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Super Hipo

Well,

I heard about the US Dollar dropping.

But this is my question are the foods prices going to drop ?


Eggs per units price?

Chicken ?

Beef ?

rice ?

Carros Publicos ?

Super Hipo doesn't even think about how hard is for Dominicans to survive.

I asked to my friend Santa Claus that talk to Super Hipo about the Dominican Salaries and foods prices.

and Santa said: "Homer if you want to spend Xmas with your family don't expect that stuff from me" "you better ask to God"


Homer
 

arturo

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Mar 14, 2002
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good question

Will food prices drop is a good question. The short answer, in my opinion, is no. Hipolito stated that his currency strategy has two parts:

1. Gradually decrease the value of the dollar to 30 pesos.

2. Reduce the cost of living for the average Dominican by decreasing prices for the grocery basket and fuel, among other items.

My opinion is based on the fact that many of the people who control and profit from the sales and pricing terms of these items are powerful cronies of Hipolito. Draw your own conclusions - I am interested in them.
 

ricktoronto

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Jan 9, 2002
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Imports = US$

arturo said:
Will food prices drop is a good question. The short answer, in my opinion, is no. Hipolito stated that his currency strategy has two parts:

2. Reduce the cost of living for the average Dominican by decreasing prices for the grocery basket and fuel, among other items.

Since nobody will agree to be paid in artificial 30:1 pesos vs. US$ for imported goods (especially oil) then how they plan to get the US$ hard currency to buy goods and sell at this lower exchange rate is a mystery, or every country in the world would do it.
 

gringo in dr

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Ricktoronto, hit the nail on the head.

Hippo can say the rate is 10 pesos to 1 USD. It doesn't make any difference.

In reality, the only thing it will do is look like a desparate stop gap messure to the rest of the world. That will lower the value of the peso to below what it actually is.

The effects of this won't be seen until the new year. Then the peso will break more records.

My question is, doesn't hippo have ecomonic advisors? I can't believe can't see this is a reciept for disaster.

I truly feel bad for the people that receive salaries in pesos (99% of the people in the DR) because they are ones that are paying for hippo's mistakes. I'm sure hippo isn't going hungry.
 

Eddy

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I feel sorry for the poor "Middle class (sic)" Dominicans. Yesterday we went to Santiago and my wife was shopping at La Serana. Some people just couldn't beleive the increase in prices and said they could not afford to buy simple Xmas lights etc. Really feel sorry for them. Looks like this will be a very quiet Xmas. I feel bad about decorating my businesses knowing that some people can't afford the basic decorations. Last year at "Price Mart" a butterball turkey RD$275.00 this year RD$800 to 1,000.00.
 

ricktoronto

Grande Pollo en Boca Chica
Jan 9, 2002
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Get Hippo to Buy It

Eddy said:
Last year at "Price Mart" a butterball turkey RD$275.00 this year RD$800 to 1,000.00.

How interesting: Imported food at exactly the same US$ price a year later adjusted for the "real" peso. Someone should give Hippo RD$520 (US$17 HippoPesos or HP$) and ask him to go buy the turkey for them. After all the peso is worth 30:1 right?

And a few gallons of gas at 25% off too. And on it goes.
 

gringo in dr

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The locals are looking at is as the prices are going up. But in reality the prices are not going up. The value of the peso is going down.

The purchasing power of their currency is dropping. Maybe if more locals understood this, they would place more of the blame on the government.

I'm so tired of hearing the dollar has gone up that is why all the prices are so high.
 
Oct 13, 2003
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Get Rich Quick Scheme

From my earlier post in another thread:

Given the expected influx of dollars into the country over the festive season, this should bring in a good supply of dollars, which need to be changed at the official rate. So even when there are no 'in country' sellers, dollars from tourists need to be changed this is were the supply of dollars will come from!

These dollars would normally end up in the hands of the cambio houses. Guess what, a comittee of Generals has met with Hippo and are now supervising the cambio houses to make sure that they will funnel the dollars into the Central Bank. He now has the strong arm to bully the unwilling 'in-country' sellers.

At the end of the festive season, the Central Bank will have a large amount of dollars, bought at an artificially deflated peso rate. These dollars can then be used to pay of foreign debt at a discount or to disappear into the pockets of the people who will distribute them.

During the festive season some of these dollars will also be distributed to 'selected individuals' who can get them for 30 peso to the dollar. Likely targets would be importing companies who are owned by supporters of Hippo. They will claim they need dollars to pay their bills outside the country. They will either pay their overseas bills at a discount or resell the dollars to the banks at a later date at a different rate of 40 peso to the dollar.

Can anybody say re-election please?

To avoid dollarization of the economy, which would prohibit the future use of this instrument, the fixed peso to dollar ratio will be abandoned in a few months time. At that time the dollar will go up again against the peso.

Who will suffer and gain from this scheme?

Losers
1) The cambio houses will loose profit by having to exchange any dollars they currently own (and bought at a real rate) to the Central Bank at a lower rate.
2) The tourists will suffer heavily and may decide to cut down spending. The question is by how much? If they cut spending by the relative amount that the real rate is cut then a zero net effect on the entire DR economy occurs. If they cut their spending by less a net positive effect on the DR economy occurs.

Winners
1) The Central Bank(government; Hippo) they obtain a large supply of dollars against a delfated rate.
2) Selected individuals who will in turn support Hippo in the next election.
3) If part of the additional profit on imports is factored in consumer prices some of this scheme could trickle down to the general populace.
4) If the tourists will not cut their spending by the same relative amount as the real rate will be cut then a net positive effect on the entire economy will occur. The profit from this will also disappear into Hippo's coffers, via the inflated exchange rate. The local economy may suffer due to lessened peso spending.

MD

PS: Sorry about the long post but it is rather complicated and you actually have to give Hippo some credit for finding a new money pump. I don't think this is the last time this instrument will be used.

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I agree with adrianb and gringo in dr, Euro is going up against dollar. The result might be that the Euro/US tourist division will be leaning towards more Euro less US tourist spending.