Crisynomics At Work: Argentina Is Low Debt Superstar

[sleslie23]

But we dont have a paralyzed economy today, as we had in 2000 when we asked for megacanje (a huge loan that indebted us more, didnt avoid the crisis and we re still paying).

Other than soybeans, what does the Argentine economy have going for it? Any and all growth has been related to that. It's a dangerous thing to rely on ONE sector to keep the entire thing from sinking.

So I really dont care if this people dont want to lend me money. As I know that lending money (or making countries take debt, thats the correct exp<b></b>ression) is all they want and the moment when their bussiness is achieved, I watch them with their anger when a country have clean acccounts with a very low debt, with an ordered balance of payments, and reject them.
I know this situation wont last forever, though. I know this government will end some day and we will take debt again, and this people will be there to lend us money, because this is who they are, this is what they do, this is when thier bussiness realises. And if some day this K government decides that they want to take debt, I m pretty sure they will negotiate too, and probably finally lend it. But its not probable to see this government knocking that door, asking for money to this people.

Debt oposes to sovereignty, to independence.
Thats my view.

Argentina (and most countries) need either debt or investment. Argentina has significant natural resources but does not have the monetary or technical resources to take advantage of them. They need either investment or debt in order to do so. Neither of those are available, or if they are, they come at a steep price with multiple strings attached.

This is not to say that I think that loansharks like the IMF/Worldbank are the solution to Argentina's problems. But many Argentines I know can't seem to understand that having an oil company doesn't make oil magically start flowing from the ground. Likewise, potash in the ground doesn't automatically start loading itself onto trains and ships for export.

 

[GS_Dirtboy]

Let's take a very simplistic view of Argentina. Argentina can produce three products; soy, oil, and natural gas. That brings in money on the income side. On the other hand they have debts. Most of those debts are paid in US dollars like bond payments and purchasing the oil it needs to meet the country's demand. In addition, it has domestic debts - the costs of running the country including massive social programs intended to assist people that live in poverty. And, there is no option for borrowing so the Argentine government CANNOT spend more money than it takes in. There is a finite amount of money in the basement.

Soy is the quickest and easiest way to get money for it's products because oil and natural gas production will require further investment. Any money used for investment (long-term planning) is less money that is available to pay it's immediate debts and run the country (immediate needs). Since people (voters) have a nasty habit of not voting for governments who reduce or take away social programs CFK, et al have no choice but to maintain those programs.

I doubt we'll see any serious long-term investment because the immediate needs are so pressing. I can only say that it's damn lucky Argentina has immense natural resources because without the money that is created in this sector, we'd be in a very different situation.

 

[GS_Dirtboy]

Snip...

Debt oposes to sovereignty, to independence.
Thats my view.

I agree on this in principle - the exception being where debt is taken on as a way to start investment. The counter-view within Argentina is the debtor always wins, not the lender! I would never want to lend money here, only borrow it.

 

[Matiasba]

Other than soybeans, what does the Argentine economy have going for it? Any and all growth has been related to that. It's a dangerous thing to rely on ONE sector to keep the entire thing from sinking.



Argentina (and most countries) need either debt or investment. Argentina has significant natural resources but does not have the monetary or technical resources to take advantage of them. They need either investment or debt in order to do so. Neither of those are available, or if they are, they come at a steep price with multiple strings attached.

This is not to say that I think that loansharks like the IMF/Worldbank are the solution to Argentina's problems. But many Argentines I know can't seem to understand that having an oil company doesn't make oil magically start flowing from the ground. Likewise, potash in the ground doesn't automatically start loading itself onto trains and ships for export.

you re wrong. Argentina has been growing for ten years, and not only for the soy. For example, we have totally beated the record (several times) of producing cars, almost a million per year, that most of them are exported. We have also beaten the record of buying brand new cars. That explains growth. Tha Asignacion Universal por Hijo also explains growth, the + 1 million retired and pensionists with steady money explains growth. The growth of Techint, the industrial growth in general (like never this country experienced)... Its true that the competitive sector of the country still is the agro, but industry have been growing enough to explain a part of the continued (10 years) growth. Check out how unemployment went down like for 10 points!!

I agree about the natural resources and how to take advantage of them. Sadly, we dont have national enterprizes that can do that, neither the State, so we have to negotiate with Canadians and Americans (for example Barrick Gold, or some oil american companies to make use of Vaca Muerta). They have the tecchnology so they keep a big part of the benefits.

 

[Matiasba]

Let's take a very simplistic view of Argentina. Argentina can produce three products; soy, oil, and natural gas. That brings in money on the income side. On the other hand they have debts. Most of those debts are paid in US dollars like bond payments and purchasing the oil it needs to meet the country's demand. In addition, it has domestic debts - the costs of running the country including massive social programs intended to assist people that live in poverty. And, there is no option for borrowing so the Argentine government CANNOT spend more money than it takes in. There is a finite amount of money in the basement.

Soy is the quickest and easiest way to get money for it's products because oil and natural gas production will require further investment. Any money used for investment (long-term planning) is less money that is available to pay it's immediate debts and run the country (immediate needs). Since people (voters) have a nasty habit of not voting for governments who reduce or take away social programs CFK, et al have no choice but to maintain those programs.

I doubt we'll see any serious long-term investment because the immediate needs are so pressing. I can only say that it's damn lucky Argentina has immense natural resources because without the money that is created in this sector, we'd be in a very different situation.

but those social plans are money into the economy, are new consumers. That explains the inflation, because there is a big demand!!
Look, this country after the dictatorship explodes every ten years. Thats because we run out of reserves, thats because lot of people take the money outside the country, because they dont believe in its policies, no matter if its centre-eft like the Ks, centre-right like Menem, extreme right like the dictatorship, moderate left like Alfonsin. It does not matter if they have been giving them lots of benefits, if they taxed them like never before (like this government). Above all, it is this impulse to take the money out.
But this time, we re in that moment again, and while there are still some (important) problems, all in all we still have a lot of reserves (at least to prevent another 2001) and I seriously doubt the Ks will finish their mandate with a big explosion like the militars, Alfonsin, and Menem did. Thats the change.

 

[camberiu]

you re wrong. Argentina has been growing for ten years, and not only for the soy. For example, we have totally beated the record (several times) of producing cars, almost a million per year, that most of them are exported. We have also beaten the record of buying brand new cars.

1) Most of the cars are being exported to Brazil. Why? Because Brazilian auto factories are already at full capacity, working 3 shifts 24/7 to meet demand and yet they can't keep up. So Argentinian plants are trying to fill that demand.

2) Most automakers are expending their capacity IN BRAZIL and NOT in Argentina to fill that demand. Where did FIAT announce a 5 billion dollar investment to expand capacity and build new plants? Brazil.
Where did Hyundai built its newest massive automotive plant? Brazil.

Which automaker is investing heavily to expand capacity in Argentina? NONE.

 

[Matiasba]

I agree on this in principle - the exception being where debt is taken on as a way to start investment. The counter-view within Argentina is the debtor always wins, not the lender! I would never want to lend money here, only borrow it.

the debt with this government was negotiation, you can accept the offer argentina made, or continue playing to get your profit. In both cases, you have won and never lost.

 

[Joe]

Interest rates are unusually low right now worldwide. Argentina's low debt levels could be a huge competitive advantage - especially when rates rise to normal level (i.e. levels not manipulated by central bank QE programs).

The Goldilocks Scenario is if Argentina got a market friendly/non-corrupt government that encouraged foreign investment combined with low debt levels would power it to first place in the world economy!!!

If Argentina could only model itself off of China instead of failures like Venezuela and Cuba there could be a bright future...

Some insist that "market friendly" and "Yanqui client state" go hand-in-hand. China proves this is NOT the case.

 

[Matiasba]

1) Most of the cars are being exported to Brazil. Why? Because Brazilian auto factories are already at full capacity, working 3 shifts 24/7 to meet demand and yet they can't keep up. So Argentinian plants are trying to fill that demand.

2) Most automakers are expending their capacity IN BRAZIL and NOT in Argentina to fill that demand. Where did FIAT announce a 5 billion dollar investment to expand capacity and build new plants? Brazil.
Where did Hyundai built its newest massive automotive plant? Brazil.

Which automaker is investing heavily to expand capacity in Argentina? NONE.

Argentina and Brazil have a big exchange agreement related to cars, where both countries win. And there are also other markets, like Uruguay, Chile (that doesnt produce any cars), etc.
We have Toyota, for example, in Campana, that sells cars to Brazil.

 

[camberiu]

Argentina and Brazil have a big exchange agreement related to cars, where both countries win. And there are also other markets, like Uruguay, Chile (that doesnt produce any cars), etc.
We have Toyota, for example, in Campana, that sells cars to Brazil.

Indeed. But no one is increasing their investments here. All car manufacturing investment is going to Brazil. Also, once Brazil gets fed up with Argentina's protectionist policies, which will happen sooner or later, and tell you guys to go you know where, the car exporting party here is over.