The hottest ticket in global markets is a bond offered by a country with 30 per cent inflation (estimated, as its statistics are not to be trusted). A recession is due in the year ahead. The two-hundred before were studded with defaults and the odd coup. Its main exports are soft commodities, and soya beans are down 30 per cent since mid-2014.
But this is Argentina, investors are determinedly forward looking and president Mauricio Macri is a true capitalist who believes in paying creditors back. In his first weeks he settled claims that predecessors had disputed for years. At a stroke, years of Peronist aggression were forgotten.
Though not quite forgiven. The 10-year notes will yield about 7.5 per cent, compared with 4 per cent for similarly sized Colombia. The bonds will be issued in dollars rather than the depreciating peso, and $10bn of the $16.5bn raised goes to extinguishing those long-disputed debts.
An FT straw poll found that 17 out of 20 investors were considering snapping up Argentine paper. This pent-up demand is to be expected. One reason is timing. Softer US monetary policy has sparked a quest for yield from emerging and “frontier” market investors (Buenos Aires’ past mishaps relegated it to the latter). The lack of anything overly similar, while annoying for analysts, is a plus for investors who dislike assets that correlate too well. Forget Chile: Argentina’s neighbour is virtually investment grade, after many years of behaving itself. Colombia is reliant on oil rather than agricultural exports. Brazil’s political and fiscal turmoil puts it at risk of swapping places with Argentina. Other frontier economies such as Bangladesh or Zambia are much less developed.
Given a fair wind Argentina may eventually enjoy a triumphant return to emerging market status. Thus far, its population has borne stoically the measures Mr Macri has imposed. But issuing debt in another currency leaves nowhere to hide from, say, a tightening in the US monetary cycle. S&P does not see Argentina’s dollar gross domestic product regaining 2015’s level until 2019. Sticking to a virtuous path is not easy. Argentina’s history is a lesson in that.
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