Investors Hope Election Reverses Argentina’s Economic Fortunes

Investors are pinning their hopes on a rejuvenated Argentinian economy post-elections this month.

Argentina IMF

Stock markets in most parts of the world are bleeding, but stocks in Argentinean exchanges are rising in value. The stock market in Buenos Aires is up more than 30% this year.

Foreign investors are back in Argentina because they are certain that Argentinean economic fortunes can only rise in the days ahead, regardless of the outcome of the election scheduled for October.

The reason for investor’s confidence is that current President Cristina Kirchner cannot run for president and FPV candidate Daniel Scioli is predicted to win the election.

Both ruling FPV candidate Daniel Scioli, tipped to win the election, and opposition candidate Mauricio Macri are reportedly efficient enough to bring Argentina out of the economic mess it is in today.

“Both Scioli and Macri have rational and pragmatic views in terms of economic and regulatory policies. Moreover, both have surrounded themselves with advisors with more market-friendly views,” writes Eurasia Group Latin America Analyst Daniel Kerner in a note to investors.

Argentina enjoyed good economic growth until 2010, when its GDP grew to a record 9 percent. But the economy stumbled in the subsequent years, largely due to misjudged policies and high energy prices. When hefty yearly debt payments drained the country’s foreign reserves, the currency slid and the economy started to sputter. Problems with Brazil’s economy, Argentina’s major trade partner, exacerbated things.

Now investors are optimistic that the new administration might reach a settlement with bondholders who rejected a debt restructuring deal in 2005 following the 2001 default. The dispute keeps Argentina from tapping capital markets and its resolution would be a signal that Argentina is reopening for business.

Currency devaluation has already boosted the tourism sector, the third largest employer in the South American country.

Foreign capital was in fact fleeing Argentina after a US count ruled against it in a case over bond payments and after the country suspended the operation of US consumer giant Procter and Gamble on charges of inflating prices of goods imported from Brazil. But Kirchner’s leaving is playing in the favor of the country.

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