There is no doubt that emerging market (EM) investors have cheered up considerably of late. Following a torrid January and February, virtually all asset classes in the EM universe appear – on aggregate at least – to be gaining in value.
The bellwether stock index, the MSCI EM index, is up 9.6 per cent from its low on February 5. EM sovereign bonds are yielding an average of 5.51 per cent, down 0.37 per cent since January 1. Local currency bonds are, in many cases, producing stellar returns sharpened by windfall currency gains. Indeed, some EM currencies are among the world’s best performers, with the Indonesian rupiah rising 7.81 per cent, the Brazilian real gaining 7.3 per cent and the Indian rupee climbing 2.8 per cent so far this year. Continue reading »
Buenos Aires: good old days
Argentina used to be known as a land of silver. About 100 years ago, its citizens were richer than the average Western European. The country’s name comes from Argentum (Ag), Latin for silver. How then did it become a relatively poor tinpot regime?
It’s a question that the Economist put on its front cover recently, with an editorial that fingered poor governance as the main cause. However, Alan Taylor, an economic historian of Argentina, suggests some different answers in an NBER paper published this week. Continue reading »
Far be it from Latin countries to indulge in some pre-World Cup schadenfreude. Nonetheless, different emerging markets have clearly been affected very differently by the recent bout of market turbulence. Take those distant neighbours, Colombia and Argentina. Two years ago, finance ministry officials in Bogotá threw a cat among the pigeons when they declared that the Colombian economy was larger than Argentina’s, making it the third biggest in the region (after Brazil and Mexico). Buenos Aires quickly harrumphed back: “Not so!” For one, that might only be the case if you converted Argentine nominal GDP into US dollars using black market (and thus illegal) exchange rates, rather than the “true” official one. Continue reading »
The devaluation is done and the peso has stabilised (for now). But can the government in Buenos Aires prevent another storm from brewing? The signs are not good.
Argentina’s forex reserves are still in freefall. The central bank haemorrhaged roughly 9 per cent of reserves in January to leave it with $28bn, according to Bloomberg. Piling on the pressure, the country’s farmers – even with a weaker peso – refuse to liquidate grain stocks for export. Jorge Capitanich, the cabinet chief who has an eagle eye for “speculative attacks” on the currency, is set to twist their arms later on Monday. Continue reading »
A timely new poll has come our way, commissioned by Graham Fisher & Company for the Emerging Markets Trade Associations, a collection of investors focused on debt. Poliarquía Consultores asked 1,000 Argentinians for their views on the economy, the problems facing the country and president Cristina Fernández de Kirchner.
The three biggest concerns for Argentines are crime, the economy and inflation and voters, the pollsters found, are unhappy with the way the government is tackling them. Continue reading »
What a difference a mountain range makes. To the east of the Andes, Argentina is in the throes of an old fashioned, disorderly devaluation, in which authorities scramble to plug every leaking channel of hard currency flows until at last they are carried off in the flood. To the west, Chile’s authorities are looking on with calm equanimity as their currency gently subsides to its own level.
What is it, other than snow-capped peaks, that unites and separates their two worlds? Continue reading »
When the oppressive heat in Buenos Aires becomes just too much to bear at the height of the austral summer, those who can afford it prefer to jet off to cooler climes to see in the New Year.
But some may have been forced to rethink their holiday plans after the Argentine government moved to stem an alarming decline of foreign currency reserves by bumping up the price at which it sells dollars to Argentines travelling abroad, in what amounts to a stealth devaluation. Continue reading »
It is the end of an era for businesses in Argentina. Might executives even start to miss Guillermo Moreno, the man that everyone loved to hate, in some perverse kind of version of the Stockholm syndrome?
Maybe that’s going too far, but the resignation of Argentina’s trade secretary – who since his rise to power in 2005 became so much more than just a trade secretary – leaves a gaping hole in the implementation of economic policy.
This vacuum of power will be filled by Axel Kicillof, a Marxist economics professor who sports Elvis sideburns, as the new economy minister. Continue reading »
"I'm outta here!"
Guillermo Moreno (pictured), Argentina’s combative internal trade secretary, has resigned, the government said late on Tuesday.
A controversial figure, Moreno has been instrumental in keeping the lid on Argentina’s runaway inflation by strong-arming companies into freezing prices and restricting imports. Continue reading »
As President Cristina Fernández’s rule appears to be coming to an end, investors are hopeful this will spur economic reform. FT comment editor Fred Studemann asks the LSE’s Alejandra Irigoín and FT deputy emerging markets editor Jonathan Wheatley if change is really afoot
Who in their right mind would want to invest in Argentina? Surely its capricious government that delights in changing the rules of the game (or just stopping the game altogether), and its troubled economy warped by price and exchange controls make it a potential disaster zone for investors – right?
Wrong. Investors have been piling into Argentine stocks all year long, with its Merval equity index very nearly doubling this year. Some stocks have quadrupled in value in 2013. Continue reading »
Argentina’s stock markets are rallying, as President Cristina Fernández’s chances of a third term weaken. But John Paul Rathbone, Latin America editor, tells John Authers the country still faces problems and the next government will have a tough job.
China's VP Li Yuanchao and Cristina Fernandez de Kirchner in May
Ask the governments of Ecuador or Venezuela: good relations with China can be really handy when you’re in a financial fix. This is something that Argentina seems to be cottoning onto, if a proposed $10bn loan materialises.
According to reports in local media this week, Argentina’s central bank is negotiating a deal with the Chinese that it hopes might help stem an alarming decline in its foreign exchange reserves. Continue reading »
Anyone unsure as to why Argentina fills foreign investors with dread need only take a glance at the list of cases it has at the International Court for the Settlement of Investment Disputes (ICSID).
Of a total of 439 legal disputes between countries and companies at the World Bank tribunal, no fewer than 50 involve Argentina – far more than anywhere else, with socialist Venezuela lagging some way behind in second place. Continue reading »
Much as Cristina Fernández might like to pretend that exchange controls don’t exist in Argentina, they do, and they haven’t worked all that well.
Since they were implemented two years ago, the central bank’s foreign exchange reserves have fallen by some $15bn, recently falling below the $35bn mark. They are now at their lowest level in more than six years. Continue reading »