LatinFinance - January/February 2016 - 2

JANUARY/
FEBRUARY
2016
FRONT NOTES

EDITOR-IN-CHIEF Katie Llanos-Small
ASSISTANT EDITOR Sara Rosner
SENIOR REPORTER Aaron Weinman
REPORTERS Patrick Ferguson, Jennifer P. Roig
Miluska Berrospi
ART DIRECTOR Rosa Matamoros-Sense
COVER ILLUSTRATION Fredrik Broden
CARTOON ILLUSTRATION
Christopher Weyant

Fickle fortunes
In a sharp twist, Argentina and Brazil seem to have traded roles on the world stage.
Argentina, which plunged into default almost exactly 14 years ago, has officially arrived back on the
global financial scene with the election of center-right candidate Mauricio Macri to the presidency in
November, much to the applause of dealmakers in the country and abroad. One private equity investor
who flew to Argentina to cast his vote, recently described an overwhelming sense of joy in his native
country that brought many to tears. "We did it, we changed," he says of Macri's victory, echoing the
name of the candidate's coalition: Cambiemos or 'Let's change'.
A transformation of sorts is undoubtedly taking place. Less than a week after being sworn in, in a ceremony that was notably boycotted by outgoing president Cristina Fernández de Kirchner, Macri lifted
capital controls that have long stifled exports, foreign investment and economic growth. In a perceived
signal of confidence, several borrowers, including Pampa Energía, Banco Hipotecario and state-backed
oil company YPF hit the markets in the wake of Macri's election and that increase in activity is expected
to persist this year.
In startlingly direct contrast, Brazil's political regime continues to lose ground. President Dilma Rousseff, who has been accused of using funds from state-run banks to fill budget gaps, narrowly escaped an
impeachment proceeding in December after the country's top court ruled that a new set of lawmakers
must be selected for the commission that would have overseen the process. On the same day, Finance
Minister Joaquim Levy, who ran into repeated road blocks in attempts to implement more austere fiscal
policies, resigned. Planning Minister Nelson Barbosa, who has been widely opposed to Levy's stricter
approach, has been tapped as Levy's replacement. Investors were unimpressed with the news, and sent
the Ibovespa stock index to a six-year low on the day of announcement.
The political upheaval occurred the same week that Fitch downgraded the sovereign's rating to
sub-investment grade. The country now has two junk ratings - after a Standard & Poor's cut in September - and other companies, including Petrobras, Cielo and Vale, are feeling the effects of knock-on
downgrades. This, combined with the arrest of BTG Pactual CEO André Esteves in connection with the
pervasive Lava Jato corruption investigation a few weeks earlier, has made for a very grim close to 2015
for Brazil.
The road to redemption for
Brazil - indeed, whether or not
the country has even begun
that journey - is far from clear.
But then, so it was for Argentina at the turn of this century.
While Brazil's conundrums are
of a starkly different nature,
Argentina's example could offer
some succor to its beleaguered
peer. Brazil's return to financial
and economic health will be
gradual, but if anything is
learned from Argentina, it's that
change, no matter how great, is
possible. LF

2 L ATINFINA NCE.COM - January/February 2016

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Table of Contents for the Digital Edition of LatinFinance - January/February 2016