Political Default in Argentina

Recent events in the country (and outside the country, but affecting it) create a rather bleak outlook for Argentina. In the eyes of Walter Molano, head of BCP Securities, the Kirchners will be ousted from their "reign", sooner or later.

When there is a lot of talk about a crisis - and there is starting to be a whole lot in Argentina - it is a bad omen. Self-fulfilling prophecies have a tendency to be ... self-fulfilling. Such talk has some strong arguments for it:

1. Argentina's public expenditure is not as controlled as it should be (energy and transport subsidies have grown at 70%+ rates per annum and are only now starting to be deactivated. in a process that could take months if not years).
2. Inflation is looming out of control, and the Statistics Institute (Indec), has been intervenes by a government court-jester who insists on amusing the Ks with laughable inflation rates. All credibility has been lost as far as any official statistic goes, and this hurts Argentina in every imaginable way (by the way, the tinkering with inflation also saves billions worth of interests on inflation-adjusted bonds).
3. Commodity prices are errant. Recent ebbs in international prices have caused many a scare locally. Even though the export-tax increases did not go through, the government still needs its fix from existing export taxes to finance the spending charade and to keep the dollar anchor.
4. Competitiveness has not been a priority since th default, and industrialists rely on a cheap dollar to export (as opposed to relying on it to enter a market, and then work on how to be more competitive, like Brasil has done). We are back to Convertibility at a different peg.
5. Argentina has no credit. Venezuela's Chavez has been kind enough to buy our bonds at exhorbitant rates (from 2x to 3x of IMF rates but hey, at least they don't tell us what to do!) and has lately lost some of his magic due to instant trading in the secondary market, resulting in a flood of bonds being sold and their attractiveness falling rapidly.
6. Insecurity has become the #1 media event after the export-tax battle epic conclusion, and a feeling of defenselessness is starting to creep into everyone's sheets at night.
   

But, most importantly, the mood on the street is different. People smile less. The 4-month export-tax battle, full of useless lies and pointless bickering, have served only one purpose: to show the people - far too soon - the President's real colors.

How long will this last? That much remains to be seen. Argentina's numbers (those that can be trusted, if any), show good vital signs. 6 years ago, Argentina defaulted on its debt. During 2008, the default has been political, and the ruling party is to blame entirely. If, like Mr Bolano suggests, they are ousted from government, however hard they try, they will have no one to blame other than themselves.

Her problems are ... that big.