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There is an increasingly common topic of talk in porteños cafes : country risk. But what exactly is the country risk?
Simply put, it is a simple algorithm (mathematical account) that compares the level of debt that a country has (with its consequent interest rate), with the rate of return more sure there is in the market, usually that of the United States Federal Reserve.
The result of this account expresses how much more feasible it would be to maximize investments by placing foreign exchange in emerging countries versus doing so within a fixed term of a powerful economy . That is, the risk of investment in a given country (hence the name).
Now it must sound logical that that number is so big. Then let's think together. Whether the current government 's strategy was to return to international credit markets to finance the infrastructure works that were lagged behind, and in parallel with the EDF's strategy (which decided the rate of return of fixed deadlines in the US) was to increase after almost a decade that rate, it is logical that the country risk has grown unmeasurably.
So, do we have to worry? Many are alarmed because the government does not talk about this or does not show “concern.” However, that's what should be calm: it is logical that this was a possible forecast for an economic team that went into debt at 100 years knowing that the FED was analyzing the climb several months ago (it was on the cover of Times, to which I imagine they are subscribed. all the ministers of economy in the world). It was the most obvious result of macro strategy.
The good thing would be that other indicators such as the Central Bank reserve (government savings), foreign direct investment (foreign investment that come to invest in long-term projects) or the balance commercial (what we import versus what we export) accompany this number positively.
So, having said that, this country risk is demystified as a red alarm about Argentina. It's a number that the world looks at, of course, but that world knows what it means, and it's not going to rely on that only when it comes to investing, nor will the national team economists change the course of their strategy to reverse this number.
It should be known that the economy is a closed mayonnaise sachet, squeezed on one side and mayonnaise shifts from place, but never disappears.
Publication Date: 17/03/2020
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