Shutterstock photo
Markets

Meet the new economic boss in Argentina, same as the old boss

Shutterstock photo

Shutterstock photo

Response from Argentine financial markets has been muted at best after President Cristina Fernandez named Hernan Lorenzino as the new economy minister for her second term. He was finance secretary during Fernandez's first term and helped manage the country's $12.9 billion debt restructuring last year.

The market had been anxiously waiting the appointment all week as the president's second term begins on Saturday.

The 39-year old Lorenzino was the widely favored choice by the business community and is seen as increasing the probability that Argentina will return to the debt markets with an issuance in 2012.

A well-subscribed debt issuance would not only help to shore up the country's weak balance sheet but would also be a vote of confidence for the government.

Argentina has been locked out of the international debt markets since its $95 billion default in 2001 and still faces the second-highest inflation rate in the world -- after Venezuela -- with prices climbing an estimated 25% over the year.

Central Bank reserves have fallen 12.5% this year as the government uses foreign reserves to prop up the peso, weakened by high inflation and capital flight.

Though Lorenzino may have been the most welcome name by the business community, do not look for many sweeping capital-friendly policy changes by the government. The Fernandez administration refuses to address the macroeconomic and structural problems in the economy -- as evidenced by official reports to the public of only 9.7% inflation.

The market may see relative strength from a risk-on trade with the news and any improvement out of Europe.

Over the longer term, the country's fundamental economic position still looks tenuous and volatility will be the name of the game.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks

Latest Markets Videos