Tuesday, November 16, 2010

Don't Cry for Me Argentina

In the face of tragedy, the beauty of opportunity awakens and educates. Not even a month removed from ex-president Nestor Kirchners' death, Argentina is hopeful for a transformation. World leaders extended their condolences to current president and widow Christina Kirchner while stocks spoke in their own language. They soared. Markets in Buenos Aires were closed for Census Day on October 27th but Argentinean equities that trade on international exchanges skyrocketed, realizing the possibilites of a more business-friendly and political environment.

The dynamic duo of Nestor and Christina Kirchner was increasingly viewed as power on the political decline. Nestor, who became President in May of 2003, was in office until 2007. Christina succeeded him as President in 2007 and is currently in office. The "first gentleman" of Argentina was widely thought to continue a political dynasty, planning to run for President in next year's elections (Argentine law states that a President can have an unlimited number of terms as long as they are not successive). He was seen as the real power figure during his wife's administration. Regardless, the pair - hailing from the legendary Peronist party - has seen their left-leaning views losing lusture.

The popularity the Kirchners enjoyed began its descent for a number of reasons. During Nestor's term, he enjoyed widespread popularity. He guided the country through the economic crunch on the back of a worldwide commodity boom. The problems began to creep up during Christina's term. In 2009's midterm elections (similar to ours here last week), the power broker couple and their party suffered heavy losses. She had a negative face off with farmers, upon whom she imposed a huge tax hike. Massive protests and strikes left her embarrassed and withdrawing the increases. Christina also nationalized the country's Social Security pension system. The theft of $30 billion in private retirement funds from her citizens accelerated her demise. Regardless, she has sought to silence her dissenters in the media. Her courting of President Hugo Chavez, who is increasingly looking like a polarizing figure in the region, is adding to her fragility.

When markets speak, it's very wise to listen. The recent run up in Argentinean bonds and equities is a stark reminder that countries who attempt to liberate themselves from suffocating government will be viewed in a favorable light. Argentineans are growing tired of incompetent politicians. They loathe their high crime and poverty rates. Inflation is spiraling out of control and much worse than actual reports as Nestor took control of the country's National Statistics Institute in 2007. Argentina is geographically in a wonderful spot. Touching both economic powerhouses of Chile and Brazil, it should be in much better shape than it is now. Let's hope that voters next year remind themselves of that when they head into the ballot box.

No comments:

Post a Comment