Our Opinion: 2014
Argentina has been relegated
Jorge Mariscal at UBS Wealth Management said recently “Argentina has all the ingredients to be great, but the political make up has been a disaster. It’s a sad story.”
The economy is in a mess and it looks unlikely to turn the corner anytime soon. Argentina is in default on a chunk of its sovereign debt, which will make it extremely difficult to raise funds it needs on the international markets. The currency has collapsed, fuelling inflation that is now 30% according to official figures. Commentators believe 40% is nearer the mark. Agricultural commodities make up a third of all exports. Falling prices aren’t helping.
Growth is around zero, and sentiment took another knock last month when the central bank’s governor resigned after a dispute with the Argentine president. He had tried to control inflation, avoid a flight of capital out of the country and head of a capital crisis by raising interest rates. This was seen as an attack on the supposedly independent central bank by the leftist government. Meanwhile, the stock market is smaller and riskier. It has been relegated to ‘frontier’ status from ‘emerging market.’
This is one South American market to avoid.