“While we might still see a currency devaluation, this won’t necessarily hinder progress. More importantly under Macri the country must normalise relations with the capital markets and start attracting the all-important foreign investors. The nation remains resource rich and Argentina still boasts vast agricultural resources as well as a highly educated population. Today there is an optimism in Buenos Aires which hasn’t been seen for over a decade.”
Alejandro Hardziej, fixed income research analyst at Julius Baer, said that the adjustments will be unpopular and hard to implement as the central bank in the short term, given the lack of international reserves and high inflation. Like much of Latin America, the country is also a victim of lower commodity prices, both directly and indirectly. Brazil is Argentina’s main trade partner and so its weakness is also hurting the country’s economy.
Nevertheless, for Argentina it represents a decisive vote for change and is a clear indication that even Latin American countries can tire of socialism. This might bode well for countries such as Brazil. Jan Dehn, head of research at Ashmore, has long said that the problems in Brazil are cyclical rather than structural and all the country needs is the right person at the helm for the country to revive. If Argentina can vote so decisively for change, it augurs well for other struggling Latin American countries. This small shift may be the start of something a little bigger.
