And finally...a letter from a smart Dear Reader:
“ I have enjoyed your commentaries from Argentina.
“I am a rancher/investor from Colorado. I was in Argentina in the 2002 when the Argentine financial crisis was in full swing. After arriving in Buenos Aires, we did a tour of Estancia from Santa Rosa back to Buenos Aires. Back then, cattle were still king – but the switch to “Soya” was in full swing.
“I recall two factors: The government, acting in the best interests of the people, of course, had placed exports taxes on beef but not on crops. The resulting low prices for beef encouraged a rapid shift to crops and keep beef cheap for local consumption. Crops earned hard foreign currency, which the Government desperately needed.
“A second factor was the influence of Ag Multinationals like Monsanto, ADM and others who, according to the Estancia owners, were not only in bed with Argentine Government officials but had gained control of a large part of the countries’ Ag infrastructure, namely the railroads. I am glad I saw the Pampas before they plowed it all up!
“When back in Buenos Aries right outside our hotel there was a currency exchange where we watched Argentineans queue up every evening to convert their daily earning to U.S. dollars.
“As we strolled the shops, merchants begged us to buy with our dollars. We saw antique furniture, paintings and other household goods marked down 50% to 75%. Shop owners seemed desperate.
“We went to Argentina to study grass-fed beef and lamb, but the our main lesson was to be in finance – or more precisely, financial mismanagement.
“Fast forward to January 9th, 2008. We are in downtown Manhattan, N.Y. on a medical related trip. This time we are purchasing antique furniture and paintings at 50% to 75% discounts and having them shipped home to Colorado. Merchants are begging us to buy. They seem desperate. My wife commented, ‘Doesn’t this remind you of Argentina in 2002?’ Is this the handwriting on the wall?”
Bill Bonner
The Daily Reckoning Australia
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About the Author
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Comment by Raf on 26 January 2008:
I can add to the picture one tax that the goverment of Mr. Kirschner implemented after this reader visit:
Being the crops the main source of money of this country, they decided to tax these exports with a 20% "Retencion". They do not call it tax directly, as taxes are also applied to them, It is a "retencion".
This money is collected directly out of the producer gains after the sale, and its volume is the main cause of our continued financial surplus.
You read well, 20%-25% depending on the crop.