Political Risk Latin America Blog @PolRiskLatam

Argentina: Dangerous Precedent

Posted in News and Articles, Political Risk by politicalrisklatam on November 2, 2010

by Walter Molano for Latin Business Chronicle, October 28th, 2010.

The immediate outlook for Argentina is positive, as the dark shadow of Nestor Kirchner fades away. 

The demise of former-President Nestor Kirchner marked an important milestone in Argentina’s history and economic development.

Kirchner came into office on the heels of the country’s debt default and economic crisis, capitalizing on the power vacuum to consolidate all political power under his domain He hijacked the national apparatus by directing economic resources to allies and denying property rights to political enemies. In the process, Kirchner introduced enormous distortions, as well as isolating the state from the international capital markets.

Over the course of the last two years, the government began taking steps to rehabilitate itself with the financial community by reopening the debt exchange on terms that were much more favourable than initially expected. The commodity boom and the surge in Brazilian domestic demand also boosted the Argentine economy. These are the main reasons why the markets recently developed a more favorable view on the country.

However, there were lingering concerns about Kirchner. His wife, Cristina Fernandez de Kirchner, may have taken office in 2007, but he was still the sole decision-maker on all aspects of national policy. Hence, it was not surprising to see the markets rally upon the news that he passed away. With the presidential elections only a year away, most investors expect the country to transition to a more balanced approach. However, there is a dangerous precedent in Argentine history that could provide some insight to what lies ahead. (continue reading… )


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