Over the past five years, Argentina has blazed its own path to recovery. Counter to many modern economic thoughts, they have walked away from convention and it has paid off so far. By marking an exchange rate with monetary policy and not an interest rate, the country has been able to control some important variables. The country’s ability to refinance debt, control growth, and control their import/export exchange has proven a viable recovery strategy. Argentina’s path encountered some new milestones/huddles this past week with an election, a minor change in export policy, and inflation policy.
In emerging markets, Argentina is in the top of its class. Outpacing growth in more markets than most and having a stability unlike others, Argentina’s trajectory has been one of envy. CEPR has recently published a report outlining a perspective on the country’s recovery cycle and the policies leading the recovery. While a strong recovery cycle has ensued, the questions lie in the future for the country. Analysts have questioned the reliability of the country’s growth due to the inflation rates, which has been questionable due to its measurement protocol. This past week’s announcement of new inflation measurement policies, matching that of the United States, is met with some relief. This in an effort to relax questions about the real rate of of the countries inflation and growth. This will slowly reveal real growth numbers and relax foreign investment concerns, provided the numbers stay within the range of past reports. At this point, that is a rather large question mark. If inflation does appear to be in check, then the flow of foreign investment may increase and further solidify the recovery cycle. The contrary path could lead to a suppression of growth.
The recent election should not change many policies, as the new president is the wife of the current one, but it may allow successful policies to continue. Although the new president faces some immediate head wind, the inflationary policy change announced last week is a step in the right direction. If Argentina’s recovery cycle continues at the same pace, it will prove to be a new model and may provide a new strategy to follow by other countries in Africa and South America.