The over-riding question that dominated the Argentine
economy in 2013 was the issue of repaying bondholders, the related US court
decisions and the response to them. This subject dominated from the beginning
of the year and was far more significant than the decline in activity ( the
first since 2001) that the stats revealed at this time. The offer made by the
country at the end of the first quarter was the same as before and little
progress was made. The most interesting event in March was the appointment of
an Argentine Pope.
April saw the capital experience the worst floods in over
100 years. There were also difficulties relating to the proposed media law
changes. And unsurprisingly the month
also saw a rejection of the offer by the bondholders. Inflation continued to be
a problem.
May was a quieter month all round and indeed the unofficial
Peso began to reverse some of its losses.
June saw the nationalisation of 2 rail routes and related
response. Around July there were initial steps taken towards exploiting the
country’s shale reserves ( although this also created opposition due to the
previous nationalisation of oil companies)
In late August Argentina lost its appeal re the bondholders
and received a downgrade.
September was a mixed month but October was notable for the
fact that the president had to undergo an operation on her head ( due to an
injury in August) which was the first of 2 events which ended her hopes of a
third term – the second being the poor result in the mid-term elections at the
end of the month. October was also the month when the country was refused an
appeal re the bondholders. The planned media law was finally passed in the
month too. November was uneventful until the end when the trade secretary left.
The last month of the year was more dramatic. A police
strike mid December led to looting and unrest and the country ended the year
with a heat-wave in the capital which was accompanied by blackouts and water
problems.
2013 Peso
At the beginning of 2013 the official Peso continued to be
maintained at the government rate of just under 5 to the US$ after a managed
depreciation in 2011-12. So in one way, not much to report. However there was
another unofficial Peso which was trading at the much less appealing 7.5.
With the bond saga continuing in the background, the picture
remained substantially unchanged through the first half of the year with the unofficial Peso reaching around 10
by the end of April/early May.
However that proved to be a turning point with the
unofficial rate returning to below 8 in June – a 33% gain in 6 weeks – in
contrast to many other EM currencies.
The continued slow depreciation of the Official Peso
continued throughout the year , but over July and August when there was a
dramatic decline in many other currencies the unofficial peso re-joined the
clan.
September’s credit downgrade by S+P would further affect the
rate.
So by October the unofficial rate was back at 10. October
itself was uneventful currency wise with merely continuing trends.
The official Peso continued its gradual decline and has
ended the year at around 6.5 to the dollar. The unofficial rate remains around
10.
2014
January and February of 2014 look to be somewhat better.
Although there are still concerns over the effectiveness of the leader
following the operation and election events. Nevertheless these 2 months pass
relatively calmly.
However as the second quarter begins we are fast approaching
a prolonged period of extreme uncertainty in the country which will last at
least until the end of 2016. March and April will provide an indication of the
themes that will dominate over the next year or so. There is a high likelihood
of funding flow difficulties, but at this stage there are sufficient investment
inflows to offset this. Expect some currency difficulties though.
May and June are pretty much in the same vein, but there may
be instances of unrest by sectors of the population. Nevertheless it is kept in
check although it does create some difficulties for the leadership.
July and August see
more attempts to keep dissent under control and this time there is
support for the government – although the people are merely deferring their
concerns.
September is likely to prove to be a mixed month but one
that is relatively stable.
October to December see the people being swept up in a
further inflationary or illusionary situation, e.g. more bondholder related
matters and the possibility of more difficulties with floods or other water or
gas related events. Economic shocks
create difficulties that restrict growth but by December there is a
particularly upbeat mood as policy begins to shift.
2014 Peso
There is not too much change in the Peso in January 2014–
either to the conditions or to the value of the official currency. A likely return to depreciation in the
unofficial one though.
By Feb and March this will calm down a little. New themes
may emerge.
These are more pronounced in April when we can expect sudden
unexpected and rapid changes in the Peso value. A more radical devaluation by the government
cannot be ruled out. But equally likely these changes are due to events
elsewhere.
May sees a more complex environment with more strict
restrictions on trade in the currency.
Although July sees more depreciation the background
situation is changing; a bottom might be reached. It is just possible that this
is due to dramatic external factors outside the country’s control. It seems to
make the currency more attractive. The impact is to make August an easier month
with a focus on long term trends.
September is harder though, there are more events that create rapid trades and some
further weakness in the currency.
October is a more stable
month when there is little development in a trend and less fluctuations.
A return to passive managed decline seems inevitable towards
the end of the year. But December sees a shift to a new situation. Possibly the
beginning of shaping a new version of the currency, perhaps a new peg or change
to a new base. There is still clear restriction on currency trade though.
2015
2015 is likely to be dominated by disputes.
But January sees continued support for government despite
some very tricky economic conditions, perhaps externally generated. Somehow
things hold together though.
February sees a return to uncertainty. This is a month
characterised by debt matters – quiet possibly in relation to the
aforementioned bondholders. Could
Argentina default now? It is possible. Certainly the positive sentiment between
government and people disappears to be replaced by resentment. All in all a
tricky time.
The poor view of the leadership by the people continues into
March and April. However, March sees the start of a new phase for the people.
But there is continued uncertainty and now this is more widely noticed in the global arena. There are continued
tricky economic events which need managing.
Matters relating to debt continue to dominate in the
following months and the sense of not being able to harness the country into
any sort of direction continues. There may be a number of disputes between May
and June although they are not likely to escalate too much as there are
corresponding calming factors.
By the end of June there is a positive boost for the
leadership and by July there is enthusiasm for the start of a new era. The
election, however is not due until October so this seems a little premature.
We don’t see an end
to the feeling of uncertainty which
continues to cast a veil over everything for a long time yet but August sees a
new more reticent mood amongst the population. There are however more disputes
from some quarters and these may create a real sense of instability. There is
an excess of emotion which perhaps is due to the coming elections.
October and November do not seem to be months of great
change. There are still the same economic challenges and the people and their
leadership are still not in accord.
Nothing really stands out as another shift until December,
when there are definite signs of the people being split in their views of the
government and of the start of a new cycle in the country.
2015 Peso
January 2015 starts with slightly new conditions Peso wise.
There is still a tendency for a slide in value but it is weaker and there are
forces undermining trading. The effect ultimately may be to stabilise
value
February and March see some dramatic trading , but again
there is less evidence of decline now – it is possible that the currency is
becoming more attractive relative to others due to their weakness, or a default
radically changes the picture.
April and May see a continuing delicate balance between
concerns about this currency and adjustment to shifts elsewhere.
On balance the currency is supported.
June sees little change in these conditions and value
fluctuations as events are priced in. Further restrictions may be necessary.
July and August start to see a focus on fundamental economic
activity rather than short term trades. On balance a relatively favourable
time.
September and October are mixed, starting with positive
momentum but getting bogged down in the value adjustments created by the
broader global picture. And another tightening of trading restrictions.
The period ends with some highly positive sentiment though.
November and December see little direction since there is a
wait and see approach as the past is left behind and a new environment begins
to dawn.
2016
A new era there may be, but many of the old issues remain.
Nevertheless there is a sense of closure over the events of the last 30 years
and there is quite a momentum for slow and deep seated change by January
2016.
February through to April see the initiation of such change
but it is far too soon to see results .
The sense of uncertainty and lack of clear goals remain and this might mean
that some factions are unhappy as things are not progressing fast enough.
However there are some gradual steps being taken in terms of policy change and
by April there seems to be a better chance to transform the debt profile than
previously.
May sees much bigger steps being made as momentum starts to
pick up and in some cases the slate is wiped clean with opportunities for a new
policy mix. The process which has been taking place since November finally
begins to take a more concrete shape and there is a big push forward. Obviously
the changes are going to take a while to get used to and not all the population
are on board but it seems to be going the right way. There may even be some
pleasant economic news.
There is little of note to report for July and August. Things carry on changing but there may be a
temporary lull and sense of inertia. There may also be a risk that the government oversells its achievements or goals at this time.
Another step in the big
shift happens in September and one of the manifestations is the country gets a
firmer grip on its economic stats.
We are seeing the last of the long period of uncertainty now
and it is easier to build a foundation for the future. The mood is likely to be
buoyant and the prospects looking relatively good by October.
November and December do end on a slightly more mixed
note. There may even be a return to
protests in some parts but the general tone is one of gradual move towards a
more stable and sustained growth. It is just a case of harnessing the energy in
the right way.
2016 Peso
January and February 2016 are broadly good for the currency,
although there are some remnants of issues from 2015 to deal with.
March sees big changes – a whole new financial picture emerges.
There is some resistance to changes but April sees a
positive trend for the currency.
May sees the continuation of the conditions commenced in
March but no real trading developments.
June to August sees the focus on adapting to the new.
The general trend is good though.
While September and October see some glances backwards to
past conditions, and some negative sentiment they are merely stages of
adjustment and cannot be deemed indicative of any future trend.
November and December are more important, showing a calmer,
economically stable currency.
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