Argentina blazes a trail
Five years after the economic crisis, concerns emerge about overheating.
It is exactly five years since Argentina defaulted on $81.8 billion of debt and devalued its currency. At the time, it was difficult to see how the Latin nation could extricate itself from financial crisis.
How things have changed. Not only has Argentina restructured its debt with its private bondholders, it has paid the IMF the almost $10 billion it owed the multi- lateral and is now seeking to tackle the $6.3 billion of defaulted debt it owes the Paris Club of official creditors.
The turnaround in its fortunes is remarkable. Today, Argentina is booming, as is most evident in the financial markets. The sovereign was the best-performing country in the emerging markets asset class in 2006, yielding 48% between January and mid-December, compared with a return of 10.6% for JPMorgan’s Embi+ index. Almost all Argentine securities rallied last year, including its par and discount bonds and especially its GDP warrants. These securities were created following the sovereign’s debt restructuring in June 2005. They returned a startling 150% in the first 11 months of last year.
Although Argentine asset prices performed well throughout the year, they really pushed on in the fourth quarter.