Steer clear of Argentina

Problems are piling up for Argentina. Investors should give the country a wide berth.

"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.

Recommended

An investment trust that gives exposure to frontier markets
Investment trusts

An investment trust that gives exposure to frontier markets

An investment trust investing in small, illiquid emerging markets has disappointed, but deserves another chance, says Max King
26 Oct 2021
Emerging markets: the Brics never lived up to their promise – but is now the time to buy?
Emerging markets

Emerging markets: the Brics never lived up to their promise – but is now the time to buy?

Twenty years ago hopes were high for Brazil, Russia, India and China – the “Brics” emerging-market economies. But only China has beaten expectations. …
18 Oct 2021
Three dividend stocks from the dynamic Asia/Pacific region
Share tips

Three dividend stocks from the dynamic Asia/Pacific region

Professional investor Sat Duhra of the Henderson Far East Income investment trust highlights three of his favourite stocks.
18 Oct 2021
Emerging-market central banks take on inflation
Emerging markets

Emerging-market central banks take on inflation

Central banks in Poland, Russia, Mexico and Brazil have been raising interest rates to get ahead of global inflationary pressures.
15 Oct 2021

Most Popular

Properties for sale for around £1m
Houses for sale

Properties for sale for around £1m

From a stone-built farmhouse in the Snowdonia National Park, to a Victorian terraced house close to London’s Regent’s Canal, eight of the best propert…
15 Oct 2021
How to invest as we move to a hydrogen economy
Energy

How to invest as we move to a hydrogen economy

The government has started to roll out its plans for switching us over from fossil fuels to hydrogen and renewable energy. Should investors buy in? St…
8 Oct 2021
Emerging markets: the Brics never lived up to their promise – but is now the time to buy?
Emerging markets

Emerging markets: the Brics never lived up to their promise – but is now the time to buy?

Twenty years ago hopes were high for Brazil, Russia, India and China – the “Brics” emerging-market economies. But only China has beaten expectations. …
18 Oct 2021