Sunday, June 15, 2008

Investing in Argentina? This is Not the Best Time.

This is a little note to warn those investing in miners, or other stocks, in Argentina.
Argentinean debt is today higher than in December 2001 when the country declared a default/moratorium. Analyst are warning that a new default may be forthcoming.

In 2005 its debt reached USD$114B, which was 56% of is GNP, or $170B if counting the debt to holders who refused to swaps on the original loans. Martin Krause and Aldo Abram, economists, warn that if Argentinean credibility continues to fall the country will be at serious risk of not being able to meet its financials obligations. The country has lately been raising capital from Venezuela. However, the economists also warn that Venezuela will not be able to to continue rescuing the country (by buying the loans or bonds), so far $6B in bonds in the last 3 years. Argentina has been paying a hefty price (14% interest). In comparison, Brazil pays 5.4% interest on 10-years bonds.

Current Argentinean inflation is at 20%. With the current situation on oil and food prices, this may get far worse.

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