Steer clear of Argentina

“It is a sad story,” says Jorge Mariscal of UBS Wealth Management. “Argentina has all the ingredients to be great, but the political make up has been a disaster.” The economy is “a mess”, says Dimitra DeFotis in Barron’s, and it looks unlikely to turn the corner anytime soon.

Argentina is in default on a chunk of its sovereign debt, which will make it far harder to raise money in international markets.

The currency has tanked as confidence in the country has fallen, in turn fuelling inflation, which has reached around 40% – although the official figure is 30%. Falling prices for agricultural commodities, which make up over a third of exports, aren’t helping.

Growth is around zero, and sentiment took another knock last month when the central-bank governor resigned after a dispute with the Argentinian president. He had tried to temper inflation, staunch capital flight and head off a currency crisis by raising interest rates.

The episode was seen as an attack on the central bank’s independence by the leftist, populist government.

Meanwhile, the equity market has become smaller and riskier. It has been relegated to ‘frontier’ status by index compilers MSCI as firms have been nationalised or gone private. Investors should steer clear.

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