Political Risk Latin America Blog @PolRiskLatam

Don’t keep your distance from Argentinian stocks

Posted in News and Articles, Political Risk by politicalrisklatam on February 18, 2011

by David Stevenson for Financial Times, February 18th, 2011.

T he 20th century wasn’t especially kind to Argentina. Years ago, some of my distant relatives travelled from Wales to the giant South American country in expectation of the country’s resources boom turning it into a southern rival to the US – only to find the country relegated from developed world status to frontier market in one century. In fact, I still have to pinch myself when I see countries such as Angola talked about as more exciting investment prospects than Argentina.

This ongoing malaise has obvious causes: think Perón, debt repudiation and inflation. And linking them all has been one central fault line: politics and the impact of populism on the private sector.

But maybe, just maybe, Argentina’s time has come! If an equally troubled Colombia can manage a massive equity boom, perhaps Argentina deserves another look.

Argentina is self-evidently not the economic basket case it has been in the past. GDP trend growth has been, and remains, above that of emerging markets poster child Brazil – it is estimated to hit 6 per cent in 2011. Meanwhile, public sector net debt has been falling steadily, down to just over 20 per cent in 2011 compared with a rising 45 per cent in Brazil. Argentina’s current account is also firmly in the black, helped by a boom in agricultural prices. Crucially, Argentina’s blue-chip companies have cut their debts and improved operational efficiency.

But western investors remain impervious – perhaps assuming that the Perónists will continue to ransack the private sector. (continue reading… )

 

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