Category: Argentina

Critics say Argentina’s problems are due to its fixed exchange rate and the economic effect of pegging the peso to the dollar. Steve H. Hanke, professor of applied economics at the Johns Hopkins University, chairman of the Friedburg Mercantile Group, Inc. in New York and the leading theoretician on dollarization, firmly believes that dollarizing is the best cure for Latin American economies. But without complementary – and somewhat radical – fiscal and banking reforms, Hanke says countries will fail to get a bang for their buck.

Argentina draws on its traditional European investor base to lead Latin bond issuers in euros this year. Eurobonds have provided cheaper funding, but currency risk exposure looms large.

Deregulation still has a long way to go in the region’s telecoms industry, but Argentina and Venezuela are opening the way to more competition and with that, more direct investment opportunities.

With a tradition of stashing money outside the country and a feeble economy at home, Argentines are wary of investing locally. The government and mututal fund companies have a tough sell ahead.

A decade of market-oriented reforms, the introduction of private pension funds and the growth of mutual funds should have transformed Latin America’s capital markets. Argentina’s private pension fund managers and mututal fund industry together manage assets worth $28 billion, up from almost nothing 10 years ago. Mexico’s Afores, or private pension funds, have more than $15 billion under management.

Argentina’s former Economy Minister Domingo Cavallo is impatient with the government’s lack of conviction in implementing the market reforms he began 10 years ago.