One of the biggest investors in Argentina said that the country\u2019s financial crisis was receding, and blamed this summer\u2019s market mayhem on a \u201cmassive speculative attack\u201d and panicky locals. Funds controlled by Michael Hasenstab, a prominent fund manager at Franklin Templeton, have invested about $4.6bn in Argentine debt, betting that the government led by Mauricio Macri will manage to reform one of Latin America\u2019s perennial basket cases.\u00a0 Those bets were hammered by Argentina\u2019s worsening crisis this year, which halved the value of the country\u2019s currency against the dollar, sent bond prices tumbling, pushed the government into a $50bn IMF programme and caused the deepest economic recession since 2008.\u00a0 However, the IMF\u2019s willingness to overhaul and possibly even increase the size of its record-breaking aid package, the government\u2019s promise to tighten its belt and the central bank\u2019s move to crank up interest rates to a painful 60 per cent have stabilised Argentina\u2019s markets, which are beginning to recover.\u00a0 \u201cIn a crisis you want to see orthodox policies, and that is what Argentina has pursued,\u201d Mr Hasenstab said in an interview. \u201cWe\u2019re seeing a pretty powerful snapback.\u201d\u00a0 The Argentine currency has climbed from a record low of about 40 pesos per dollar to 37.22, the Merval stock market has bounced by 37 per cent from its late-August low, and Argentine bonds have recovered some of their losses, sending yields lower again after the summer spike.\u00a0 Mr Hasenstab said that the severity of the sell-off was overdone, exacerbated by the broader emerging markets turmoil triggered by Turkey\u2019s ham-fisted response to its own crisis, a domestic population scarred by the country\u2019s many past crises \u2014 which sent them flocking to convert pesos into dollars \u2014 and foreign investors aggressively betting against and exaggerating Argentina\u2019s vulnerabilities.\u00a0 \u201cThere was a huge speculative attack launched on Argentina, and there was a lot of misinformation spread by people that were shorting the currency,\u201d he said. \u201cSpeculative attacks in August, when no one is around, can quickly get legs. And they were vulnerable because it takes time to rebuild confidence domestically.\u201d\u00a0 All told, \u201cit was a perfect little storm\u201d for Argentina, said Mr Hasenstab, the chief investment officer of Franklin Templeton\u2019s global macro team.\u00a0 The Macri government has pledged to eliminate its primary fiscal deficit next year \u2014 the gap between spending and income, before taking debt servicing into account \u2014 compared with a previous target of lowering the deficit to 1.3 per cent of gross domestic product. The fiscal deficit was 3.9 per cent in 2017, while the target for this year is 2.7 per cent.\u00a0 Recommended The Big Read Argentina creaks under extreme stress Central bank data indicate that the rush by ordinary Argentines to convert their peso deposits into dollars has also been halted, relieving one of the main pressure points against the country\u2019s currency.\u00a0 The IMF is also expected to finalise a revised programme for Argentina soon, perhaps as early as this week, which will probably lead to a front-loading of money disbursements and possibly an increase in the size of the hefty programme.\u00a0 Although many investors are sceptical that the deficit can be eliminated so quickly and worry that the austerity will topple Mr Macri in elections next year \u2014 and even some former IMF officials have criticised the programme as overly generous to Argentina \u2014 Mr Hasenstab argued that the fund should, and would, keep faith. \u201cI don\u2019t know what else they could have done,\u201d he said. \u201cWhat Argentina has done has exemplified orthodox, sensible policies, which isn\u2019t common in the world these days.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
One of the biggest investors in Argentina said that the country\u2019s financial crisis was receding, and blamed this summer\u2019s market mayhem on a \u201cmassive speculative attack\u201d and panicky locals. Funds controlled by Michael Hasenstab, a prominent fund manager at Franklin Templeton, have invested about $4.6bn in Argentine debt, betting that the government led by Mauricio Macri will manage to reform… Read more »<\/a><\/p>\n","protected":false},"author":132,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[48],"class_list":["post-1960","post","type-post","status-publish","format-standard","hentry","category-article","tag-https-www-ft-com-content-9483fdee-beed-11e8-95b1-d36dfef1b89a"],"_links":{"self":[{"href":"https:\/\/baileyonlineclassroom.com\/theamericasblog\/wp-json\/wp\/v2\/posts\/1960","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/baileyonlineclassroom.com\/theamericasblog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/baileyonlineclassroom.com\/theamericasblog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/theamericasblog\/wp-json\/wp\/v2\/users\/132"}],"replies":[{"embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/theamericasblog\/wp-json\/wp\/v2\/comments?post=1960"}],"version-history":[{"count":1,"href":"https:\/\/baileyonlineclassroom.com\/theamericasblog\/wp-json\/wp\/v2\/posts\/1960\/revisions"}],"predecessor-version":[{"id":1961,"href":"https:\/\/baileyonlineclassroom.com\/theamericasblog\/wp-json\/wp\/v2\/posts\/1960\/revisions\/1961"}],"wp:attachment":[{"href":"https:\/\/baileyonlineclassroom.com\/theamericasblog\/wp-json\/wp\/v2\/media?parent=1960"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/theamericasblog\/wp-json\/wp\/v2\/categories?post=1960"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/baileyonlineclassroom.com\/theamericasblog\/wp-json\/wp\/v2\/tags?post=1960"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}