From Bloomberg:
It’s hard to believe now, but in the early 1980s, Argentina was perhaps the most promising and talked-about emerging market. Coming off the trauma of its Dirty War and military dictatorship, and its disastrous invasion of the Falkland Islands, democracy finally set root in 1983. Endowed with abundant natural resources, endless tracts of fertile land, and half-decent infrastructure, the then-167-year-old country projected upside to the investor community.
But Argentina regressed. In late 2001, as its economy collapsed, the country defaulted on $100 billion in debt and nationalized several enterprises. Argentina has since been a pariah state among international creditors. At the World Bank’s International Centre for Settlement of Investment Disputes, Argentina has more disputes pending against it than any other nation. Since 2003, rulers Néstor Kirchner and wife Cristina Fernández de Kirchner have nationalized $24 billion in private pensions and raided $6.6 billion in reserves from the central bank to make debt payments.
Now, Cristina Fernández (a widow since October 2010 and re-elected by landslide a year later) is seizing control of YPF, the former national oil monopoly that since 1999 has been majority-owned by Spain’s Repsol (REP:SM). On Monday, she delivered a fire-and-brimstone speech on TV that blamed foreigners for the energy shortages plaguing the country—a rationalization of what would be the largest natural resource re-nationalization since Russia moved to seize Yukos in 2003. Fernández decreed that Argentina’s minister of planning and public investment would immediately assume the reins at YPF.
My view:
The pariah state Argentina remains a warning for state planners in developed economies.
Massive nationalizations have resulted in stagnation, rapid inflation, and ruin.
With the resources and infrastructure to potentially rival the US and Canada in terms of per capita GDP, instead the country continues to linger lethargically since the 2001 credit default.
Eleven years of hardship have apparently not been sufficient to learn the lessons the market wants to teach.
Now, in the US, Canada, Australia, and most of Europe, the central planners strive to "stimulate" the economy through bond market borrowing and money printing.
Anyone with an ounce of common sense can see that this is a logical fallacy that will end painfully on the trash heap of history.
Mr Romney & Mr Obama, are you listening?
Investors are you taking the appropriate precautions to protect yourselves from the socialist virus?
It’s hard to believe now, but in the early 1980s, Argentina was perhaps the most promising and talked-about emerging market. Coming off the trauma of its Dirty War and military dictatorship, and its disastrous invasion of the Falkland Islands, democracy finally set root in 1983. Endowed with abundant natural resources, endless tracts of fertile land, and half-decent infrastructure, the then-167-year-old country projected upside to the investor community.
But Argentina regressed. In late 2001, as its economy collapsed, the country defaulted on $100 billion in debt and nationalized several enterprises. Argentina has since been a pariah state among international creditors. At the World Bank’s International Centre for Settlement of Investment Disputes, Argentina has more disputes pending against it than any other nation. Since 2003, rulers Néstor Kirchner and wife Cristina Fernández de Kirchner have nationalized $24 billion in private pensions and raided $6.6 billion in reserves from the central bank to make debt payments.
Now, Cristina Fernández (a widow since October 2010 and re-elected by landslide a year later) is seizing control of YPF, the former national oil monopoly that since 1999 has been majority-owned by Spain’s Repsol (REP:SM). On Monday, she delivered a fire-and-brimstone speech on TV that blamed foreigners for the energy shortages plaguing the country—a rationalization of what would be the largest natural resource re-nationalization since Russia moved to seize Yukos in 2003. Fernández decreed that Argentina’s minister of planning and public investment would immediately assume the reins at YPF.
My view:
The pariah state Argentina remains a warning for state planners in developed economies.
Massive nationalizations have resulted in stagnation, rapid inflation, and ruin.
With the resources and infrastructure to potentially rival the US and Canada in terms of per capita GDP, instead the country continues to linger lethargically since the 2001 credit default.
Eleven years of hardship have apparently not been sufficient to learn the lessons the market wants to teach.
Now, in the US, Canada, Australia, and most of Europe, the central planners strive to "stimulate" the economy through bond market borrowing and money printing.
Anyone with an ounce of common sense can see that this is a logical fallacy that will end painfully on the trash heap of history.
Mr Romney & Mr Obama, are you listening?
Investors are you taking the appropriate precautions to protect yourselves from the socialist virus?
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