Is Argentina a risk worth taking ?
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Argentina was a first world country at the beginning of the twentieth century, during the worldwide agricultural commodities boom but sadly, lost its way with social and economic policies, more associated with the fascist governments of Europe, from the 1930s under a movement called Peronism.
Peronism is what could be described as a movement that is “a riddle, wrapped in a mystery, inside an enigma”, in that it is almost impossible to define in conventional politics.
At times it swings to leftist policies that are idealist in the extreme rather than practical and at others, it swings to the neoliberal right but without the checks and balances that make that system work.
Currently, Argentina would be best described as a frontier market with a tendency for suffering economic crises and political instability. The only exception was for a short period of administration by a non-Peronist government led by Mauricio Macri when it showed indications of responsible and non-corrupt administration were possible.
Sadly it was not to last and the Peronists returned and brought back hyperinflation, default and corruption.
Argentina is however also where risk-takers can reap huge rewards.
1. Cristina Fernández was president and is currently vice president and is still the power behind the current Peronist movement, controlling around 30% of the population’s vote ( the poor ). Her cynical policies of buying votes using a network of corrupt party officials to keep the poor dependant have driven the economy over the cliff with an exodus of Argentina’s brightest and best-educated, to countries like New Zealand, Australia and elsewhere.
2. That Argentina will continue down a path representing Venezuela, which was one of the richest countries in Latin America, but has been destroyed by a broken democracy and a dictatorship supported by a corrupt military.
3. That hyperinflation and crushing debt will make reforms difficult to implement.
4. That the billions of savings that fled Argentine when the Peronists returned to power will not return even if there is a return to a business friendly goverment.
5. That China, having taken over much of the Pacific, will fill the gap left by America vacating the region and become the major power in the region.
Reasons to be Optimistic
1. Like the Ukraine, Argentina has some of the best farmland soils and climatic conditions in the world for high production of crops, making it one of the world’s most important food producers.
2. Irriatgion for farming is relatively low cost due to a high water table in the most productive provinces.
3. It is energy-rich with large deposits of natural gas, and oil.
4. It is mineral-rich with large deposits of lithium, iron ore, uranium, lead, zinc, silver, copper, manganese, and tungsten.
5. Argentina is home to Latin America’s most advanced nuclear energy program.
6. Argentina has developed a large amount of hydroelectric power generation and has plans for more.
7. A highly educated middle and upper class that supports the productive sectors.
8. It has a European Colonial history resulting in one major religion and a similar gene pool.
9. On paper, G20-member Argentina, is Latin America’s third-biggest economy.
The Reasoning that the pessimists are wrong
1. We believe that, unlike Venezuela, Argentina has no military risk to its democracy as it is very weak, unmotivated and underfunded.
2. Middle class Argentines are over the roller coast economy lead by corrupt politicians which benefits the political elites but is a disaster for the majority of the population, so are likely to vote for change. Proof of this is the libertarian candidate Javier Milei who did very well in the Mid Term elections.
3. Many Argentine companies have quite strong balance sheets, says Daniel Marx, a former finance secretary, but he notes the “zipcode effect – the same balance sheet in other places would have a much lower yield”. Mr Marx is executive director of Quantum Finanzas, which has signed alliances with US financial boutique Evercore Partners and G5 Advisors in Brazil.
4. The assets are cheap. Real Estate values are currently severely depressed. The problem is that the current financial climate is not very favourable due to a mixture of Covid and unfriendly business policies which have depressed investors and frozen the markets.
“Unless you see a change in policies towards the private sector, it’s hard to see that value being easily unlocked,” says GTSA.
Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Uruguay and Chile, providing expert advice on property acquisition and investment tours.
The Gateway Team – When You are Serious About Property
Post available in: English