Why would any sane rational person loan money to anybody south of Texas and north of the South Pole? Is it any wonder that Argentina defaulted on $132 billion? Is it any wonder why most Hispanic countries have a fraction of the income per capita that Americans do?
Hey! You're reading that data wrong! 80-100 out of the last 120 years is bad, but your chart is actually from 1824-2004 which is 180 years.
ReplyDelete80-100 years in default in the last 180 isn't so bad. Isn't that about the what's expected for the American consumer in the next 180 years?
Touche!
ReplyDeleteyes, I suspect with all the bleeding of our houses' equity and massive entitlement programs and the utter lack of fiscal austerity we'll be joining the ranks of our Latin American friends.
I will say I'm impressed with Brazil's Lula though.
And of course the point is wrong. Mexican tesobonos were a decent investment after their liquidity crisis, and Argentina has rewarded some investors handsomely. There's a point somewhere here, no doubt clear to the savvy economist, about risk and return.
ReplyDeleteNo, the point still stands. In general this is a lousy track record and should be a deterrent to not only government money but FDI going in. And yes, you'll have the occasional investment that will succeed and yes, people should recognize that investing overseas in developing markets has inherent risk to it, and yes, even some investments will provide great returns, but that still doesn't change the fact the credit risk of Central and South America is high and nor explain why the hell the yield spreads are so dang low after the anal raping investors got in Argentina. Combine it with the Peruvian water problems, Bolivia's Morales talking nationalization, yeah, right, there's no credit risk worth discussing here.
ReplyDeleteOf ocurse, Captain, the risk was somewhat mitigated by the fact that the outside investment could generally be recouped by the argument:
ReplyDelete"Dear defaulting South American nation: As you have failed to meet your obligations, we have no choice but to run your ports at gunpoint until our investors are repaid. We regret any inconvenience or embarrassment this may cause your citizenry, but if you don't like it, please consult our warships in the harbor. Yours sincerely,
The European Powers"
I'm not saying credit and investment was safer, mind you, but it did happen on occasion. And it's so much fun to read about when it did...
Yes, I read about that somewhere a long time ago.
ReplyDeleteWhew! Could you imagine if we had pulled that off in Argentina back in 1999-2001????