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Breakingviews: Malos Aires

Friday, January 24, 2014 - 03:22

Jan 24 - Antony Currie and Christopher Swann discuss how the Argentine peso's huge drop on Thursday could mark the start of a larger financial markets rout for poorly run emerging market countries.

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-- Argentina's Central Bank must be really glad it's Friday yesterday the currency the peso suffered. As much -- 17% drop off to the Central Bank decided to stop intervening to keep the counselors and try to defense. Quite some time now in the greatest success Chris you've been in this that is one huge drop in Monday. We saw several other jobs and energy markets and American elsewhere. One is going off. Well normally -- central banks decide to change policies we've let it the fan base signaled this month and elicited look -- unreasonable that the Fed equals they go against what accent but. Nonetheless it's very bad for a Central Bank to abruptly change policy day by day like -- and and she said that Argentina has been trying to keep the patch things relative statement against the dollar. Think -- pulled the plug and it was the largest drop we've seen since 2002 which -- -- went on to Tina. -- suffered last huge financial crisis that has been a few ripples elsewhere I think the time -- come under pressure and that was of wet. The first size of the 97 crisis came from. Turkey's currency came under pressure yesterday as well a couple of second biggest drop during the he said so what is it about Latin American countries that has got several of them. To basic -- when is bush so what what what's going on. Well we thought a reasonable degree of discrimination between those countries that have relatively sensible economic policies and they -- half taking leave Pete. Economic policy -- Venezuela for example selection particularly regret having Lee Pete palaces and that Venezuela -- him -- Argentina's ideological sibling when it comes to economic policy they manipulate the inflation right. It's extremely interventionist. They'll say it'll. That bombs suffer all day the foreign exchange rate very tightly controlled. Similarly with Brazil which is very much fallen out of -- recently. Had to kind of chunky full -- some resilience in countries like Colombia where economic policies have been very restrained in the past the virus strain you're saying way to exodus much control of things with his property rights. But this intervention potent -- markets and also -- But I think what you're saying about Venezuela and Argentina there is certain reluctance trusts let us say in some of the nutritional -- flexed. Yet in the case of Argentina the officials. Inflation rate. He's now about fed death what economists estimate the -- inflation rates and I think it's a -- doctors -- -- looking pretty bad at the fish raised 11% front and two minutes and 30% cash yes has -- trench 28%. So that's that's opens it becoming says a surprise that suppose that's Argentina. Such a big drop -- -- On this. Very -- silence. Despite Islam its previous policy was that they might be heading for real trouble -- technical for laughing you need when you would have -- thank -- percent to inflation right. It's a massive depreciation if you currency which raises the cost him pools. -- and an intelligence unit that's something fairly dramatic in the way -- protesting policy. They could be heading I really runaway inflation. Which is terrible economic growth and not look too good for the people living now. Hi Chris well thanks so that will be keeping an -- all these foreign currency developments and we'll be back with more breaking -- next week.

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Breakingviews: Malos Aires

Friday, January 24, 2014 - 03:22