After Argentina went full retard in the primary’s, and like someone had predicted, we had a black monday and the market went berserk. The country devaluated the peso by almost ~30% and the people who had savings in USD started pulling them out of the banks in fear of another crysis.
After letting the dollar float to find a stability point, the Goverment finally started selling USD in the currency markets to try to stabilize the price. However, when all these measures were deamed uneffectives, the central bank of Argentina (BCRA) limited the purchase of foreign currency for “physical people” to 10K USD a month, and to 0 for enterprises or LLC’s if the money was going to be used for savings and not for investements or normal operations of the company.
For the common household, 10K USD is A LOT of money, and only the big fishes could purchase that amount. However, because of them, they had to find another way of purchasing foreign currency, bypassing the controls. Enter the “Contado con Liqui” or Blue Chip Swap.
Argentina has some bonds that have different prices both in USD and in argentinean pesos’, but the underlying security is the same, only with different ticker. So, if you had pesos, you could purchase the bond in pesos and sell them instantly in USD, resulting in a “purchase” of dollars. Usually, when there’s no purchasing limit, this dollar is lower than the retail price.
HOWEVER, due to the limitations, this dollar rised in price, having a difference of 2 or 3 pesos (5,2%) with the retail price on the first day of the policies.
So, the local market thought : “Wait, this isn’t like 2011-2015, I CAN purchase an amount of dollars per month. Why don’t I buy USD at the retail price, buy the bonds with USD and then sell them with Pesos? I would win a difference with basically Zero Risk. ”
Argentina’s people went on a shopping spree between last week and today. This operation called the “rulo” (The LOOP ) would let the average Juan max out his limit of 10K making a high return zero risk investment.
On recap :
1) You entered the bond market with Pesos
2) You Bought dollars (USD) at the retail price (Let’s say 57$/USD)
3) You bought a dual cotization bond, like AY24D or AO20D in dollars on the inmediate liquidation market.
4) You sold the bond, only against Pesos this time (AY24, AO20, etc). Again, you sold it with inmediate liquidation. Basically you had 0 risk of a change in value.
5) With this, you are back in pesos, only you bought USD at 57$/USD and sold them at 60$/USD, making a margin of 3 pesos per USD. This margin started at 2,5 pesos (4% return) and hit 7 pesos per dollar yesterday (12% return).
6) Rinse and repeat.
THE LIMIT: Was on point 2), because you are limited to only purchasing an accumulated 10K USD per month.
Major Consequences : Stock Brokers couldn’t keep up with the high demand of new accounts, servers crashed and even the central market (BYMA) crashed. The Argentinean people who didn’t touch a single bond in their life to beign obsessed with this and if had the knowledge of how to perform it, oh boy, your whole family and friends would break your balls non-stop. This was like the “I know computers” of family reunions.
THE END: All USD currency has to come from somewhere. The BCRA was bleeding reservers by feeding the markets with the supply of dollars. To end this operation, they didn’t only put it to sleep, they slit it’s throat and shot it 27 times just to be sure.
As of today, the BCRA instructed that all purcharse of USD could not be used for the purchase of bonds in USD for a period of five (5) bussiness day. This was annoying but not game breaking, if you had 2k USD you could still max out on profits, only that you were limited to one operation per week.
But today, the CNV (Our SEC fed by asado and poor decisions) went full autistic and instructed that bonds in USD could only be purchased or sold in T+2. On top of that, you had to have the bond in your possession for another five (5!!) bussiness days.
So: On day 0 you purchased USD. On day 5 you could purchase the bond at T+2. You received it on day 7 and could only be sold on day 10 at T+2 period.
On a recap : It was a fun two weeks boys, and for a brief period of time we had a 7-12% returns at Zero Risk while having on of the worst economies of the planet.
TL;DR : On this case, if you’re going to be retarded, just go full retard man.
Disclaimer: Consult your financial professional before making any investment decision.