FX REPORT Argentinean peso
How did it all go so wrong? Words | Smart Currency A
rgentina: how did it all go so wrong? It was one of the richest countries in the
world when we entered the 20th Century, but since then it has only gone one way – and that is down. For someone like me, it is diffi cult to understand why. They clearly have some
signifi cant resources. I for one was taught at school about the Argentinean pampas and the huge food resources they have, from both the cereals they grow through to their world-famous cattle and the succulent steaks that they produce. Argentina also has other resources such as oil. The trouble, however, is that they have just nationalised some of the foreign oil producers. This results in two problems: fi rstly, state- controlled enterprises prove to be less effi ciently run than privately- owned businesses, and secondly, it makes foreign entities much more reluctant to invest in the country. We also have to remember
that Argentina went bust not so long ago and refused to pay out
40
on its bonds that it had issued internationally. They are still being sued over these bonds, as just recently some of their naval vessels were seized when in port elsewhere in the world. And then we have the Falklands.
With oil apparently having been found off the Falkland Islands,
Argentina has only gone one way – down
there is much sabre-rattling taking place. Hopefully it won’t end up in confl ict like last time.
So given the above, you would
think that living in Argentina wasn’t that great. However, the reports I have read seem to indicate quite the opposite – with there being a good lifestyle and a population pragmatic to the “whys and wherefores” of their politicians.
People who go on holiday to Argentina also generally enjoy their time there.
Exchange control is still much a
factor of trade with Argentina. A country that has defaulted on its debts not that long ago looks after its foreign currency reserves very carefully, which means that the fl ow of funds, especially foreign currency, is very strictly controlled by the state. It also makes it more diffi cult to attract inward investment, because any foreign investor will want to know how they can repatriate any profi ts or loans eff ectively.
Looking at the exchange rate
over the last fi ve years, it has clearly been one-way traffi c. We have seen sterling strengthen by 66% from January 2009 to around the 8 level as I write; the euro by 60% against to 6.75; and the US dollar by 75% to just over 5.23. This should be a boost for
Argentinean exports, as it makes their products more competitive – unless, of course, the product (such as oil) is universally priced in
www.opp-connect.com
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80