It's a case of deja-vu all over again, as Yogi Berra would say. And for Argentina, that spells trouble.
Argentina seems to be unable to make gains on the tenuous foothold it obtains each time it adopts new economic strategies and is graced with foreign investment. This time, however, President Fernandez's attitude towards the country's financial troubles is seeing everyone out to the door. Foreign investors are getting the jitters, en masse, and without them, Argentina stands to lose a lot.
And the people who are moving out are the big players: China, Brazil and everyone in between. They fear another implosion. This time however, they are not waiting for the house to fall.
Without foreign investment, Argentina will be caught in a dangerous cash crunch, and hiring will certain slow down significantly.
Fernandez's attitude so far, has been nearly autocratic. She has angered the private sector, enacted a parallel exchange rate, which does nothing to stave off the crisis in the long run, and generally behaved as if she wants Argentina to be a big player in the International business community without having to abide by any of the international community's rules.
In fact most of the policies she has enacted to slow down the onset of economic slowdown have been nothing more than fingers in the dam, so to speak, and betray a lack of vision that could see Argentina flounder as never before.
Argentina still operates in an insular way, thinking it can just sidestep or avoid altogether its obligations. Having defaulted on 100 billions dollars in debt ten years ago, it should have learned that trust depends on both past and present practices.
Fernandez furthermore, has basically appropriated the pension funds to pay government debts 5 years ago, and nationalized companies, all of which are measures that take the country backward not forward, and spook investors. In addition, there are allegations that she has manipulated the economic data, something even more dangerous for foreign investors. Inflation is now almost 25%, a rate already unsustainable, and foreign firms are prohibited from taking their profits outside the country, although economic ministers insist that inflation is at a manageable 8%.
The idea that Argentina was on a good track because its economy was still growing in recent years, was undermined by the rate of inflation and the sudden but not guaranteed burst of growth created by the same foreign investment that is now evaporating.
News have also been published that the Interior Commerce Secretary, Moreno, has threatened the principals of Vale's mining company with incarceration if they withdraw their investments in Argentina. Vale is a very large Brazilian mining interest. Such threats do nothing to better the situation, and speak to an increasing sense of desperation that completely wipes out whatever faith or trust foreign companies still hold in the South American country.
The Chinese companies, likewise, have realized that the parallel exchange rate forces them to use a black market exchange rate that is ruinous, and that threatens to wipe out any profit that could be had. This was also Vale's main bone of contention at the negotiations when Moreno threatened the company.
While the big hitters are going home, some companies are staying. But that's not because of any sense of loyalty or true profitability. The reason they are staying is because they cannot repatriate any of their money or profits.
Source : Huffington Post/ IHT global opinion/ The Economist 6.13.13
Without foreign investment, Argentina will be caught in a dangerous cash crunch, and hiring will certain slow down significantly.
Fernandez's attitude so far, has been nearly autocratic. She has angered the private sector, enacted a parallel exchange rate, which does nothing to stave off the crisis in the long run, and generally behaved as if she wants Argentina to be a big player in the International business community without having to abide by any of the international community's rules.
In fact most of the policies she has enacted to slow down the onset of economic slowdown have been nothing more than fingers in the dam, so to speak, and betray a lack of vision that could see Argentina flounder as never before.
Argentina still operates in an insular way, thinking it can just sidestep or avoid altogether its obligations. Having defaulted on 100 billions dollars in debt ten years ago, it should have learned that trust depends on both past and present practices.
Fernandez furthermore, has basically appropriated the pension funds to pay government debts 5 years ago, and nationalized companies, all of which are measures that take the country backward not forward, and spook investors. In addition, there are allegations that she has manipulated the economic data, something even more dangerous for foreign investors. Inflation is now almost 25%, a rate already unsustainable, and foreign firms are prohibited from taking their profits outside the country, although economic ministers insist that inflation is at a manageable 8%.
The idea that Argentina was on a good track because its economy was still growing in recent years, was undermined by the rate of inflation and the sudden but not guaranteed burst of growth created by the same foreign investment that is now evaporating.
News have also been published that the Interior Commerce Secretary, Moreno, has threatened the principals of Vale's mining company with incarceration if they withdraw their investments in Argentina. Vale is a very large Brazilian mining interest. Such threats do nothing to better the situation, and speak to an increasing sense of desperation that completely wipes out whatever faith or trust foreign companies still hold in the South American country.
The Chinese companies, likewise, have realized that the parallel exchange rate forces them to use a black market exchange rate that is ruinous, and that threatens to wipe out any profit that could be had. This was also Vale's main bone of contention at the negotiations when Moreno threatened the company.
While the big hitters are going home, some companies are staying. But that's not because of any sense of loyalty or true profitability. The reason they are staying is because they cannot repatriate any of their money or profits.
Source : Huffington Post/ IHT global opinion/ The Economist 6.13.13
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