Avocado's, border tax and Peso....

[CHCRandy]

I like how the media keeps saying the American consumer will pay the 20% hike....not sure how they are figuring that. Let's say I am an Avocado importer and I buy 1000 pounds a week and the supplier in Mexico charges me 8000 Peso. A year ago I would have to send him $500 USD to pay for my order...today I would send him around $380...now even if someone did add 20%, it still seems 10% cheaper to me. If someone would like to enlighten me on what I am missing, I am all ears.

 

[Indy-Mike]

Why would the farmer sell them cheaper?

 

[dyerwatcher]

Liberal math. They are cheaper due to the devaluation of the peso

 

[Alpo]

That assumes that the Mexican wholesaler accepts pesos in exchange for avocados. Unlikely as the US$ is still the defacto currency for international trade.

Mexico ships approximately 1.2 billion pounds of avocados to the US each year. Susie Homemaker, if doesn't run into a shortage of avocados at her local market, will pay th 20% uptick, plus any additional amounts the supply chain adds in for their trouble.

 

[hoosierdoc]

You are buying with American Dollars, the avocado costs the same in pesos when buying in pesos, and it costs the same when buying in American Dollars. Get a middle man to buy them in pesos and then ship them to you.

 

[CHCRandy]

That assumes that the Mexican wholesaler accepts pesos in exchange for avocados. Unlikely as the US$ is still the defacto currency for international trade.

Mexico ships approximately 1.2 billion pounds of avocados to the US each year. Susie Homemaker, if doesn't run into a shortage of avocados at her local market, will pay th 20% uptick, plus any additional amounts the supply chain adds in for their trouble.

The Mexican wholesaler wants paid in Pesos. He prices everything in Pesos. Just because the dollar is more don't mean the Peso is less to him....he is dealing in Pesos not USD. The wholesaler is still being made whole, just it takes us less $1's. I got a friend who runs one of my roofing crews who sends money to his family in Mexico to purchase land and homes. He told me 8 years ago for every $100 USD he sent his mother she would pick up 1100 Pesos, now she picks up 2000-2200 Pesos.

Let's say someone has a farm listed in Mexico for sale for 700,000 Pesos....he don't care what the exchange rate is as long as he gets 700,000 peso. So you can buy a farm in Mexico today for 1/2 what you could 8 years ago.

 

[Woobie]

I think we're missing the point. The media just admitted the tax would be paid by the consumer. All these years they've been screaming about how we should raise "corporate" taxes. And now they've slipped. The consumer always pays at least most of any given tax.

 

[DeadeyeChrista'sdad]

Whoops!

 

[Old Dog]

I guess I don't understand the math here. If I am paying 100 "some-things" for a product today and a new 20% tax is added to it tomorrow, and the product has not changed, I would be paying 120 "some-things" for it tomorrow. Someone is getting the 20% extra and someone is paying it. If the supplier does not lower his original price the product is costing 20% more today than yesterday regardless of the exchange rate. The end user is going to pay a higher price unless someone in the chain lowers their margins. No??

 

[CHCRandy]

I guess I don't understand the math here. If I am paying 100 "some-things" for a product today and a new 20% tax is added to it tomorrow, and the product has not changed, I would be paying 120 "some-things" for it tomorrow. Someone is getting the 20% extra and someone is paying it. If the supplier does not lower his original price the product is costing 20% more today than yesterday regardless of the exchange rate. The end user is going to pay a higher price unless someone in the chain lowers their margins. No??

Negative. You would still be 100 somethings or less....because your 100 somethings would now be worth 120 somethings.

Here is a link that explains it pretty good. You will have to take the space out from between market watch.....because the site thinks it's a bad word. http://www.market watch.com/story/no-your-avocados-probably-wont-cost-20-more-2017-01-27

 

[Alpo]

The Mexican wholesaler wants paid in Pesos. He prices everything in Pesos. Just because the dollar is more don't mean the Peso is less to him....he is dealing in Pesos not USD. The wholesaler is still being made whole, just it takes us less $1's. I got a friend who runs one of my roofing crews who sends money to his family in Mexico to purchase land and homes. He told me 8 years ago for every $100 USD he sent his mother she would pick up 1100 Pesos, now she picks up 2000-2200 Pesos.

Let's say someone has a farm listed in Mexico for sale for 700,000 Pesos....he don't care what the exchange rate is as long as he gets 700,000 peso. So you can buy a farm in Mexico today for 1/2 what you could 8 years ago.

Sorry, but it doesn't work that way. You think that the Mexican cartels want pesos for cocaine? Either the avocado importer or the exporter, or BOTH are hedging the currency transaction. The wholesale exporter is most likely to denominate in dollars. I was involved in forward foreign exchange contracts in a prior life in a global business. US counterparties are generally less willing to deal in foreign currency and conversion.

Your original micro-economic theory is just not reasonable in real life circumstance. The remainder? Not so much.
Mexican drug cartels want pesos for cocaine. Dollars or Euros are preferable and the standard of interchange in economies with internal currency problems.

 

[CHCRandy]

Sorry, but it doesn't work that way. Either the importer or the exporter, or BOTH are hedging the currency transaction. The wholesale exporter is most likely to denominate in dollars. I was involved in forward foreign exchange contracts in a prior life in a global business. US counterparties are generally less willing to deal in foreign currency and conversion.

Your original micro-economic theory is good theory, just not reasonable in real life circumstance. The remainder? Not so much.

You are way over my head now...I just know in layman terms if someone in Mexico has something to sell and they want 100,000 pesos, it takes me half as many dollars to get them pesos today than 1 year ago. I am not disputing what you say, I just don't understand it. I would love to know how to trade in currency, and have looked into FOREX before....but I realize I am not near smart enough to figure that stuff out on my own.

 

[Alpo]

A farmer may be willing to accept less dollars than he would pesos, because he believes the dollar will not lose value tomorrow while his peso becomes more worthless. If he is a shrewd exporter (and most exporters are shrewd if they are in business for any length of time), he's going to want dollars or Euros for his products.

Currency transactions are not for the faint of heart! In our business, we were either protecting long-term supply contracts or known international currency movements. The idea was not to "make money" on the currency swap, just to protect underlying values. Scary stuff when the numbers begin with a "B" (as in billions). Lots of internal oversight as well as help from bank specialists.

 

[femurphy77]

So I don't have to worry about my Mexi-Coke from Sam's Club going up anytime soon? Whew! That stuff is damn near nirvana, just add a little Sailor Jerry and you're there!!

 

[Alpo]

If Trump gets 20%, expect that Sam will get a price increase of 22.

 

[phylodog]

Some of you are completely missing the point here....we will gladly foot the $113 billion dollars per year that illegal immigrants cost us so long as the price of avocados remains reasonable.

 

[Alpo]

I don't think it's that easy Phylo. We are a country dependent on low cost labor for many tasks and services. If you eliminate "illegal" labor and their possible drains on our economy from services they depend on, things don't get automatically "repriced".

It all sounds good, but complicated interdependencies result in unforseen problems.

But, hey, we might not need all the LEO's with the Mexicans gone.

https://www.bloomberg.com/news/arti...ike-if-trump-deported-undocumented-immigrants

https://www.theatlantic.com/politic...se-against-enforcing-immigration-laws/387004/

 

[CHCRandy]

Some of you are completely missing the point here....we will gladly foot the $113 billion dollars per year that illegal immigrants cost us so long as the price of avocados remains reasonable.

No need to worry about Avocado prices if they deport the illegals......cost of homes will triple, roof replacement, lawn care, apples, all will triple. Not to mention, most of them illegals are paying more in taxes than 60% of US citizens.

I don't think it's that easy Phylo. We are a country dependent on low cost labor for many tasks and services. If you eliminate "illegal" labor and their possible drains on our economy from services they depend on, things don't get automatically "repriced".

It all sounds good, but complicated interdependencies result in unforseen problems.

But, hey, we might not need all the LEO's with the Mexicans gone.

https://www.bloomberg.com/news/arti...ike-if-trump-deported-undocumented-immigrants

https://www.theatlantic.com/politic...se-against-enforcing-immigration-laws/387004/

Yeah, If they deport them we are screwed. The way the younger American laborers work, things would triple in cost, or maybe more.

 

[phylodog]

Ok, you've both convinced me. I'm no longer a proponent of the wall or deportation just as long as those not legally within the borders of this country, nor legal citizens of this country are entitled to any government assistance. If they can show proof of paying taxes their children can attend public schools.

 

[Leadeye]

Avocados, meh.