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What is the country risk?

Enter the note and find a simple explanation for a complex topic.

Politics and Economics

There is an increasingly common topic of talk in Buenos Aires cafes: the country risk. But what exactly is the country risk?

In short, it is a simple algorithm (mathematical account) that compares the level of debt a country has (with its consequent interest rate), with the safest rate of return on the market, usually that of the U.S. 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 in 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 to you that that number is so big. Then let's think together. If the current government's strategy was to return to international credit markets to finance infrastructure works that were behind schedule, and at the same time the strategy of the FED (which decides the rate of return on fixed deadlines in the US) was to increase that rate after almost a decade, it is logical that the country's risk has grown immeasurably.

So, do we have to worry? Many are alarmed that the government does not talk about this or does not show “concern.” However, that is what should calm us: it is logical that this was a possible forecast for an economic team that went into debt for 100 years knowing that the FED was analyzing the increase several months ago (it was on the cover of Times, to which I imagine all the world's finance ministers are subscribed). It was the most obvious result of the macro strategy. The

good thing would be that other indicators such as the Central Bank reserve (government savings), foreign direct investment (foreign investors who come to invest in long-term projects) or the trade balance (what we import versus what we export) accompany in a positive way this number.

So, having said this, 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 be based on that when it comes to investing, nor will the economists of the national team change the course of their strategy to reverse this number.

It should be known that the economy is a closed mayonnaise sachet, it is squeezed on one side and mayonnaise moves from place, but never disappears.

Publication Date: 17/03/2020

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By: Lucas 18 March, 2020

Pero si ni tú mamá invierte en este país! Como no alarmarnos? Petroleras y mineras se están yendo a otros países porque no tienen un retorno mayor al %30. No sean fanáticos bobos, salgan a manifestarse contra este gobierno se chorros y vagos!!

By: Lucas 18 March, 2020

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Donde estuviste los 4 años anteriores?

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