A country going south?
Even by South American standards it’s been a tumultuous period for the country that brought you the tango, the gaucho and a scrappy little conflict in the South Atlantic.
When the Argentine peso started going down like a homesick mole, the central bank stepped in, raising the interest rate three times in a week to leave the key borrowing rate at a punchy 40%. This provided some relief to the battered peso, but the currency is still down 15% this year against the US dollar.
President Mauricio Macri has been pushing a policy of gradual change to wean the country off years of populist government, but it hasn’t done a lot to address concerns about the thumping current account and budget deficits, as well as high inflation. This at a time when emerging markets as a whole are under pressure from higher US interest rates and the resurgent dollar.
Now the big question is whether the crisis is specific to Argentina, or merely the first stage of wholesale flight from emerging markets. If it is the latter, this could spell real problems for Macri, whose reform programme is being resisted vigorously by unions and the parties of the left wing, while being attacked by conservatives for not cutting hard enough and fast enough.
To steer the country through this middle ground, Macri’s going to need the dribbling skills of Lionel Messi combined with the sleight of hand of Diego Maradona.
The worry for SA is that nascent investor interest after our political changes may be reversed in a widespread emerging-market contagion.