Investors In Argentina Won’t Cry

Image source:

What's going on?

Argentina booted out its left-wing government for the first time in 12 years and elected the business-friendly mayor of Buenos Aires as President. Investors are optimistic that this will herald a historic shift for the economically troubled country (and have already sent its stock market up around 35% as the result became more likely in recent weeks).

What does this mean?

Like many emerging market economies, Argentina has been struggling due to the fall in commodity prices. Government mismanagement of its economy has also made things worse for Argentina specifically. Inflation (rising prices) has become severe and the peso has lost a lot of its value. The new President, Mauricio Macri, is expected to encourage investment from foreigners, which could help to improve the countrys economy as well as offer attractive opportunities for foreign investors in one of South Americas largest countries.

Why should I care?

  1. The bigger picture: Nobody will lend Argentina money. Potential lenders have been too worried that Argentina would not be able to pay back any loans that they are given (a loan would be given in US dollars). Once Macri establishes his credibility, this sort of financing could open up for Argentina.
  2. For Argentine stocks: Political risk remains precarious. Historically, the left-wing Peronist party has dominated politics and they remain entrenched politically and, probably, willing and able to impede the new Presidents agenda. One Presidential election might not be enough to turn Argentina decisively around although the stock markets move in recent weeks suggests that investors are optimistic that it will be.
Originally posted as part of the Finimize daily email.

The top 2 financial news stories in 3 minutes. Join over one million Finimizers

Read next

Google Steps Up Its Cloud Game

Sign up to Finimize

Get the two most important global financial news stories each day. Sent at midnight UK time.

Get started with one email a day

The top financial news stories in 3 minutes.