ARGENTINA'S ECONOMICTANGO
steak. People in Buenos Aires know to have a good time before they can’t anymore. One longtime investor in the agricultural sector I spoke with forecast doom: “You might not see it, but people are desperate. They see it all happening again, and there’s nothing they can do but hold on and hope.” But people are upset. Rising inflation, at around 55% now, is destroying the livelihoods of large swathes of the population. A few weeks before I was in town, protestors demanding food assistance occupied a main square downtown. ANOTHER SIGN OF INFLATION – STICKERS TO UPDATE PRICES ON MENUS… And Argentines readily take to the street. “It’s when we see footage on CNN of people throwing rocks at police in downtown that things will be really bad,” the agriculture investor told me.
According to Goldman Sachs, the economic crisis that’s unfolding in Argentina could rival the country’s 2001 crisis, widely viewed as the country’s worst of the past few decades. Then, the peso – when its peg to the dollar broke – collapsed from one to three to the dollar, and the sovereign bond default was then the biggest in history. Inflation accelerated to 40%. The proportion of Argentines living in poverty more than doubled to an incredible 58% from 1998 to 2002. WHAT’S NEXT? “Right now, investors have sold so much that Argentinian assets are priced like the country is going the way of Venezuela,” one analyst told me. “And while it might get bad, it’s not going that far.” The head of investor relations of one company I went to visit in Buenos Aires – which raised hundreds of millions of dollars in a New York IPO just a few years ago – said that he’s heard crickets from investors since August. “We were busy before... but now, nothing,” he told me. The shares are down 68% since early August... and 83% since its IPO. Every crisis eventually exhausts itself. Markets self-correct – the expensive become cheap, the desired becomes undesirable, and sooner or later all the sellers have sold. The economic crisis that’s unfolding in Argentina could rival the country’s 2001 crisis, widely viewed as the country’s worst of the past few decades.
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October 2019
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