Argentina: Slight hiccup affects investor appetite
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Argentina: Slight hiccup affects investor appetite

Foreign investors are starting to return to Argentina’s capital markets just five years after the country’s severe economic crisis. However, their confidence has been shaken following the government’s apparent manipulation of the inflation rate for January.

Argentina is attracting some 1.8% of all the money invested in emerging markets’ capital markets, according to Saravia Financial Management, a Buenos Aires fund manager. In the 1990s, when Argentina was the darling of Wall Street, it attracted some 8% but this plummeted to 1% during the economic meltdown of 2001 and 2002.

High spread

According to the JPMorgan Emerging Market Bond Index, the country’s bond issuance has a 205-basis point spread over US treasuries, which is the second highest in Latin America after Ecuador (at around 700bp).

Argentina’s spread has dropped from 5,363bp over US treasuries at the height of the economic crisis in December 2001, and from 376bp over in February last year.

The spread dropped as low as 185bp over in January this year but rose again after the Argentine government sacked Graciela Bevacqua, the head of the national statistics body in charge of monitoring the inflation rate, Indec.

Officials at the institution accuse the government of manipulating the inflation rate for January so that it came in at 1.2%, pointing to a true rate of more than 2%.

Alberto Saravia, chief executive of SFM, says: "Foreign investor interest in Argentina today is still a fraction of what it was during the 1990s.

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