DATA CLAVE – International conditions are once again favorable for emerging countries. These conditions make it easier for Argentina to recover economically, but we have to do things right. The business climate is essential for investments to grow. And the market no longer trusts Argentina. It is up to us to take advantage of this situation so that the crisis does not leave any more consequences.
International conditions are once again favorable for emerging countries. The dollar index lost 5.75% so far this year, showing more a weakness of the dollar than a strength of the other currencies with which it is compared, hitting two-year lows. In the same sense, world interest rates are close to zero and even, in some cases, reach negative territory.
This causes investors to look for another place to place their capital, and that place is the emerging countries. An example of this is the case of Peru, which managed to place US $ 4,000 million in the international capital market in three bonds: one for US $ 1,000 million over 12 years at a rate of 1.86%, just 100 basis points above the rate paid by the US, another of US $ 2 billion at 40 years with a rate of 2.78%, 125 points above the US, and another US $ 1 billion at 100 years at a rate of 3, 23%, 170 points higher than the northern country. All this in the middle of a political crisis that caused them to have 4 presidents in the last 4 years. The confidence of the market is not in the governments of the day, but in the country. This allows Peru to face the expenses of the pandemic without having to resort to excessive monetary issuance with its consequent depreciation of the Nuevo Sol.
Likewise, the weakness of the dollar causes the prices of commodities, measured in US currency, to rise in price. So far this year, soybeans had a rise of 22.91%, gold 21.1%, corn 8.9%, wheat 3.27%, copper 25.55% and silver 35%. On the other hand, oil collapsed 25.78% in 2020 due to the economic paralysis that caused the demand for crude oil to plummet, although it is well above the floor it touched in April.
These two favorable conditions (global hyperliquidity and high commodity prices) make it easier for Argentina to recover economically in the coming years, but first we have to do things right.
The capital that is looking for businesses to invest is not going to come from the simple fact that we have raw materials. For more income that an investment project guarantees, if we squander those income with exorbitant taxes, and private property is not guaranteed, nor will they consider us to sink a single dollar.
The business climate is essential for investments to grow. We must understand that without entrepreneurs who dare to invest in our country, there will be no work for Argentines. The current government’s discourse of wanting to give everyone a job, but in the meantime it seeks to expropriate companies, declares a public service to telecommunications, advances against justice and constantly maintains an anti-business discourse is a very costly contradiction for Argentines.
The market no longer trusts Argentina. The price of the newly restructured bonds is proof of this (the AL30 has fallen 25.6% since the restructuring), and it is something we are paying for. The fact that, despite the global liquidity mentioned above, no one wants to lend us money (at a reasonable rate) to face the crisis, reflects that no one believes that Argentina will improve if it continues on this path. As a consequence, the increase in public spending, which occurred due to the pandemic, is being financed in large part with monetary issuance and remunerated debt (Pases and Leliqs). As a result, the enormous amount of pesos that are circulating and that will circulate in the future will be paid for with more inflation.
Argentina is going through a very big economic crisis. Fortunately, international financial conditions are working in our favor. It is up to us and only us to take advantage of this situation so that the crisis does not leave permanent consequences on our economy, such as a higher level of structural poverty.