Many customers ask us every day in which they can invest their money so as not to lose purchasing power over time in a global inflationary economic context. Argentina is known to be a country where its currency is constantly devalued and we are all used to the fact that saving in pesos means losing money, but the most common solution is always to simply save in dollars.
Today we have four major problems:
- The difficult access to dollars: Given the restrictions imposed on exchange matters that affect not only the dollars bought in banks, but also those bought through the stock market, access to this currency is difficult for many savers day by day, forcing them to exchange in pesos to save, either deposited in a savings account or in a fixed term.
- Rates in pesos: Savings banks do not pay any real interest, the interest paid by this type of banking instrument is symbolic and is approximately 0.50% per year. Some banks have started to offer other types of accounts with different names which do pay a real interest of around 50% per annum, but in any case it is still half of the projected inflation. Fixed terms today are around 75% annual rates, a significant improvement over the performance of savings banks, but still represent a 25% loss of purchasing power.
- The exchange delay: We can clearly see how, although the MEP, CCL and BLUE dollar have an upward trend, it is not enough to keep up with the inflation that Argentina has in pesos, so save in dollars (without investing them), or rather dollarization of savings and keeping them in the mattress as many Argentines do, also generates a loss in purchasing power.
- Inflation in Dollars: Around the world, given the current economic context, we are seeing inflation rates becoming representative, as inflation in the United States is not zero or close to zero as it has been for many years, but is projected at numbers close to 7% per year. In turn, Argentina is experiencing an inflationary phenomenon in hard currency that is rarely seen, where products and services increase in their cost in dollars, that is, regardless of the value of the peso against the dollar, day by day the prices measured in dollars and even more than the inflation that exists in the US. This last phenomenon is largely due to the backwardness of the exchange rate and to speculation and excessive mark-ups.
Now that we know the problems we face…What do we invest in?
We have 4 options, 2 fixed income and 2 variable income and we can all work from Bull Market Brokers in a very simple way.
- Fixed income pesos: Bonds or bills adjusted for inflation or CER, are instruments issued by the National State in the short term (in the case of letters) and medium term for bonds which, in addition to paying an interest rate close to 1.5% per annum, adjust their capital and interest based on the CER index that reflects the devaluation of the currency or its loss of purchasing power. The index has been compiled by the BCRA since 2002 and aims to provide a reference rate.
- Fixed income dollars: negotiable obligations in USD, These are medium-term corporate bonds that pay an average annual rate of 11% in dollars today. Some ONs stand out from the others in their rate, such as the case of YCA6O with an IRR of 23.22 and a 3-year investment.
- Variable income pesos: Argentine stocks They are at very low historical prices (measured in dollars) and are an excellent opportunity for those looking to invest in the country. They are risk instruments.
- Variable income dollars: The cedars They allow the Argentinian investor to invest in the main shares of the North American market in a very simple way, they can be bought in pesos and it is a way to dollarize savings while they are invested. For reference, the S&P 500 has accumulated a return of 360% over the past 18 years. Although the return of the index has historically been 8% per year, the annual rate of return has increased over the past 20 years due to the major technological changes and the new high-growth companies added to the index and the market in general. There is a CEDEAR that replicates the S&P500 index that can be traded in pesos under the SPY ticker.