For me, looking at Latin America, the experience was fascinating: from going through the old print archives to having a reason – an excuse – to meet with some of the region’s most important and influential bankers and policymakers.
There were three main initial lessons that I took from lengthening the prism of coverage to encompass half a century (beyond how bullet-proof the optimism of bankers tends to be, especially in contrast to the scepticism of the accompanying Euromoney editorial comment throughout our history).
The first has been just how surprisingly important technical issues can be in determining the fortunes of a continent. The best example of this was the role that computational capacity played in the 1994 creation of the Plano Real and the development of Brazil’s economy and financial markets.
Persio Arida, one of the architects of the stabilization plan pointed out that without the computational capacity of the Brazilian financial system – essentially its ability to enable positive interest rates to be maintained within a system even when faced with hyper-inflation and the high velocity of money – the Plano Real wouldn’t have succeeded in the manner that it did. Not only that, but in the years running up to the monetary experiment the banking system would have been substantially weakened (as banks wouldn’t have been able to profit from payment floats), liquidity would have drained abroad (why would investors keep money onshore if it was receiving negative returns), and inflation (though admittedly very high at a peak of 2,477% in 1993) could have spiralled to the unconstrained levels we see in Venezuela today.
Or to put it another way, had the Argentine banking system had computational capacity there probably wouldn’t have been a wholesale adoption of dollar savings (and offshore following the disastrous decision to pursue ‘pesoification’ of the banking system in 2002).
How different would both Brazil’s economy and domestic capital markets be had it not had this technical ability? How different would Argentina’s have been had it had it?
Sometimes, technical details really do carry a lot of narrative weight.
Second is the, sometimes crucial, role of dumb luck. Cavallo says that in 2002 Argentina failed to secure the help it needed in debt restructuring because it was stuck in the middle of spat between US president George Bush and IMF president Horst Kohler caused, in part, by shifting US interests following the 9/11 attacks.
Or, staying with Argentina, Cavallo adds that if he had kept his job as finance minister for the country in the 1990s for another 12 months, and hadn’t been ousted from the cabinet in 1996, he would have ended the fixed exchange rate and slowed the inflows of capital that led to debt build-up and an unsustainable FX. There are many examples in the history of countries, banks and individuals when external factors combine to blindly determine the outcome of sub-plots.
And third is the frighteningly circular nature of history. Take, for example, this headline: “Argentina takes the first step on the long march to recovery”. When do you think that article was published in Euromoney? The 2010s? The 2000s? Maybe the ‘90s? The ‘80s or the ‘70s? Here’s some of the text to help narrow it down: “Argentina’s problems are political rather than economic. If they could have political stability they could have a real economic miracle.” Wait, there’s more: “But bankers cannot be blamed for feeling that they have seen it all before in Argentina’s case, and while they are prepared to refinance most of them will be very reluctant to commit any additional new money yet.”
This was published in 1976.
And it’s not just Argentina. How about this on Brazil: “The realities of reform Brazil-style?” Beyond the headline: “If you change the age of retirement and reduce the size of pensions this would provide the government with very important savings.”
It was 1993. The number of examples of articles that could be cut-and-pasted into next month’s Euromoney is incredible.
Developing such a decades-spanning perspective has been an interesting process.
The realization is that factors crucial to a story’s development may be buried in the details, or the story may be dictated by a much bigger geopolitical story, and that the outcome of our day-to-day, or month-to-month struggles is rarely exclusively in our own power (and they are probably just part of another loop of history, and soon to be retired to the archives anyway).
Whether you see that as a positive or a negative thing probably depends if you are a journalist or a banker.