Stupid Question, but why now? Peso Devaluation

Lee, you pretty much answered your own question. The mismanagement of the government in all matters, and now the effort to pass the Law of Lemas, the effort to fix the rate of exchange, etc., etc. has caused a complete lack of confidence. You might think nothing has changed, but the problems are worse today than they were a few months ago. I think this government is incapable of managing the country in a responsible, effective manner.

In today's Diario Libre the lead story is about the status of the IMF agreement. They are saying that the DR has not yet fulfilled the pre-requisites, meaning that the agreement is still up in the air.

Acuerdo FMI no tiene fecha para ser conocido

At the end of this press conference the last two questions were about the IMF agreement with the DR.

Chiri

See also the piece in today's DR1 news.

Chiri

Also understand that the government has major debt obligations that are due (in USD) this month. So the dollars need to come from somewhere...In addition they are printing inorganicos, while offering more CD's at high rates...
The biggest thing is the lack of confidence, though. Nobody believes the dollar will go down in price any time soon and people like me are afraid to even have USD deposits in the DR for fear that they may be confiscated and exchanged into pesos. For instance I have some dollars that I was going to transfer to my bank account in the DR, for future use. I'm now holding them in the US and will not transfer them unless I absolutely need to. I'm sure there are a lot of people doing the same. Anyone who can get their hands on dollars is doing so and holding on to them.
The only saving grace (at least for a little while) would be if the IMF helps the government defer payments of interest on the external debt until 2005. All this means though is that whoever is in power in 2005 will have a hell of a time controlling the rates.
If the Ley De Lemas passes (which I believe it will) the crisis will turn even uglier, as this means that the PRD WILL be staying 4 more years in power. I'm pulling out all my money...not investing a dime until there's definition of the political situation.

Argentina is now saying that they only intend to pay 25 cents to the dollar on their defaulted sovereign bonds, and this is sending a cold chill throughout the emerging bond markets. Word is that the DR might be next due to its inability to find dollars to service its debt. But before it defaults, there will probably be what amounts to a confiscation of dollar accounts, some form of coralito, as a desperate last measure to avoid default. So far, all the schemes have failed miserably, only adding momentum to the unavoidable crash that is about to come. Get your
wheelbarrows ready: you will need it to haul the worthless pesos around while you shop!

I'm negotiating to open an Import & Export business shipping "things" to the Turks and Caicos and will establish a US$ account there. Never in the DR. Even Scotia Bank isn't immune to Hipolitos greed to gather dollars for his pocketbook.

Texas Bill

Lots of reasons

All the reasons for the peso collapse have been discussed ad nauseaum earlier.

A short summary:

1) No valid budget and cash prognosis from this government. Therefore no agreement with external financiers (IMF), thus no more credit for Hippo cum suis. No more credit means no reserve in foreign currency, thus causing an upswing in price for what dollars are available.

2) Payment of notes due in dollars. Due to the amounts due in the next month the government has to get dollars in or default on their foreign debt. If this happens the DR will go to junk-bond status. Big demand means higher price for the dollar.

3) Payment of notes due in pesos. Due to the amounts due in the next month the government has to print new pesos (inorganicos) or default on their local debt. They can always print more pesos but these are not covered by assets. Thus the intrensical value per peso is lowered. Lower value means higher exchange rate.

4) The abandonment of the fixed exchange rate scheme. By trying to fix the exchange rate, the government has worked against market forces, creating a black market. By letting the scheme go, the peso adjusts downwards towards the dollar, reflecting the real rate.


Final word of advise (as I have been saying all along) get your money out while you can! In max 1-2 months all dollar accounts will be nationalized and converted to pesos!

MD

banks are not going to convert dollars to pesos

I talked with the manager of Banco BHD and he said that they belong to an international banking Association that will not allow them to convert US dollars to pesos.

perhaps government banks might do this but according to the banker this is not true.

LA Woman

LA Woman who will keep the gov't from forcibly coming in and doing whatever pleases them? Hippo has shown he'll use the military to force things his way.

Just two reasons

HIPOLITO and PRD !!

Re: banks are not going to convert dollars to pesos

LA Woman said:

I talked with the manager of Banco BHD and he said that they belong to an international banking Association that will not allow them to convert US dollars to pesos.

perhaps government banks might do this but according to the banker this is not true.

LA Woman

Click to expand...

LA Woman,

I have seen enough to know the dollar accounts will be nationalised or frozen soon -> Hippo needs the dollars and will not let any escape from the country, so willl freeze or convert the dollar accounts.

Don't measure Hippo by your own ethics and think he couldn't/wouldn't do this or that for Hippo has none! He will do what he has to, not what is ethical..




MD

Go Doors!

Re: Re: banks are not going to convert dollars to pesos

MerengueDutchie said:

LA Woman,

I have seen enough to know the dollar accounts will be nationalised or frozen soon -> Hippo needs the dollars and will not let any escape from the country, so willl freeze or convert the dollar accounts.

Don't measure Hippo by your own ethics and think he couldn't/wouldn't do this or that for Hippo has none! He will do what he has to, not what is ethical..




MD

Go Doors!

Click to expand...

Look, the same in Venezuela with Chavez!! they are the best beasts in LaTam