As they say, when the United States sneezes, the world catches a cold. For emerging countries such as Argentina, without access to foreign markets, the situation is more delicate. For this analysts and investors estimate that the liquidity crisis that has already shaken four banks abroad it will add further difficulties to the economylocal companies and finally with the IMF, in a context of record inflation, lack of dollars and historic drought.
The main impact was observed in the so-called “flight” of investments towards quality assets (Fly to quality), to the detriment of emerging bonds and equities. “To the extent that there is what is known as Fly to Quality, i.e. risk aversion, is what is being seen these days, due to the experience of previous crises, will mean more difficulties for emerging markets, including Argentina,” said the former finance minister, Daniel Marx.
Despite the slight recovery of the markets on Thursday after the decision of private banks to bail out the First Bank in the United States, Argentine government bonds accumulate losses of 10% in the month and returned to neutral ground after posting strong gains earlier in the year. And the shares, also punished in the last week, recovered 10% in pesos, but are still down 5% in dollars for the year.
The saga of bankruptcies and bailouts, which began with Silicon Valley Bank and which this Thursday led to the bailout of Fist Capital, will have its tailspin for companies. “No major companies are related to Silicon Valley Bank, it is not a direct effect, but it makes the banking environment rare and as it is an entity that specializes in technology and startups, there could be problems to finance the sector, which is important here” , said the former head of the Central Bank, Mario Blejer.
In technology, a category led by Mercado Libre and Globant, they recognize that the first thing that suffers in an adverse scenario is the ability to go out and sell shares to self-finance. But the private sector could also suffer from what it sells to the world. Soybeans in Chicago have lost 3% in the past 10 days – trading at $548 – and the Central Bank has already sold $1.8 billion of its reserves for the year.
“Argentina does not have access to the international bond financial market as a country, but the tightening conditions make it difficult for the private sector, as well as export prices, due to the effects on the activity it impacts at a very sensitive level moment for Argentina, among other things because it suffers the ability to accumulate reserves at a certain price”, said the director of Quantum.
International banks with Argentinian investments are more optimistic. They believe that “there is no connection, unless it’s long and that’s where it pours.” In another entity, they even think that any rate hike brake could be “good” for Argentina. But Blejer sees a less encouraging picture: “By giving priority to inflation, they raised rates and this affected financial stability.” “It will be more difficult for banks to finance themselves,” he added.
Anyone who knows Wall Street assures it tremors from US rate hikes are ‘specific’“and that Argentina has more serious problems. “Any flight to quality generates demand for dollars, so in general it’s not good for emerging markets, now given Argentina’s pathologies these effects seem secondary to the huge domestic problems,” he said Diego Ferro, managing director of the M2M Capital Management fund in New York.
The turbulence occurred in a week in which the IMF agreed to an easing of reserve targets, in exchange for tightening parallel dollars. That front could also add pressure. “The only thing I see is less attention to our problems from the IMF and the Treasury and less funding for Argentine startups, when money is scarce everyone becomes a little more demanding,” said Javier Timerman, partner at AdCap .
Source: Clarin
