Conorworld
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- Feb 21, 2009
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Gusgutier,
Thank you for response but I have been led to believe that the price of soy has dropped considerably in the last year just like the vast majority of raw resources and materials.
Furthermore I think one can make a lot of comparisons between Argentina, Chile, Venezuela etc when there is a disproportionate amount of government revenue is based on a single or a small number of raw materials, regardless of what they may be. It is how you use those revenues where there can be a divergence. Argentina may not have a giant state revenue entity like CODELCO or PDVSA but is nevertheless heavily reliant on revenue from agricultural exports.
CODELCO and the Chilean government have been prudent in their investment and are now in a much better position than Argentina to weather the storm with a sovereign wealth fund and a fiscally prudent economic policy during the good times. They are in a stronger position to tackle the global slowdown.
http://www.economist.com/research/articlesBySubject/PrinterFriendly.cfm?story_id=13145570
Argentina on the other hand pumped and primed the domestic economy throughout the commodity boom. I will admit that the collapse in commodity prices hasn't fully hit the state coffers yet but in time it will and it is this delay in the crisis fully hitting Argentina that will be interesting.
In relation to my comparison with Ireland. I know it is not exactly great to make such comparisons but it was about my own speculation about a drop in inflation in Argentina. Similar fiscal policies occured in Ireland that have happened in Argentina. An over-reliance on domestic construction and banking had the same effect in many ways to what happened in Argentina in relation to inflation. We had a slowdown before this economic calamity hit the world economy and now it is worse, hence why our government debt is so high now. Other nations are slowly catching up in the race to develop government debt.
The major difference is that Ireland has the Euro and cannot devalue itself like Argentina has. This may prevent a major drop in inflation but a lot of fundamentals are there and since no one can really predict how this will all work out one cannot discard the possibility of deflation. Yes it is highly unlikely in Argentina but no one really knows.....
Thank you for response but I have been led to believe that the price of soy has dropped considerably in the last year just like the vast majority of raw resources and materials.
Furthermore I think one can make a lot of comparisons between Argentina, Chile, Venezuela etc when there is a disproportionate amount of government revenue is based on a single or a small number of raw materials, regardless of what they may be. It is how you use those revenues where there can be a divergence. Argentina may not have a giant state revenue entity like CODELCO or PDVSA but is nevertheless heavily reliant on revenue from agricultural exports.
CODELCO and the Chilean government have been prudent in their investment and are now in a much better position than Argentina to weather the storm with a sovereign wealth fund and a fiscally prudent economic policy during the good times. They are in a stronger position to tackle the global slowdown.
http://www.economist.com/research/articlesBySubject/PrinterFriendly.cfm?story_id=13145570
Argentina on the other hand pumped and primed the domestic economy throughout the commodity boom. I will admit that the collapse in commodity prices hasn't fully hit the state coffers yet but in time it will and it is this delay in the crisis fully hitting Argentina that will be interesting.
In relation to my comparison with Ireland. I know it is not exactly great to make such comparisons but it was about my own speculation about a drop in inflation in Argentina. Similar fiscal policies occured in Ireland that have happened in Argentina. An over-reliance on domestic construction and banking had the same effect in many ways to what happened in Argentina in relation to inflation. We had a slowdown before this economic calamity hit the world economy and now it is worse, hence why our government debt is so high now. Other nations are slowly catching up in the race to develop government debt.
The major difference is that Ireland has the Euro and cannot devalue itself like Argentina has. This may prevent a major drop in inflation but a lot of fundamentals are there and since no one can really predict how this will all work out one cannot discard the possibility of deflation. Yes it is highly unlikely in Argentina but no one really knows.....
