Argentina’s “football” fans are a boost for their team, but are a drain on the Argentine economy. Don’t worry about the “vulture funds,” high inflation or fading economic growth. With all of the bad financial news in Argentina, at least Argentines can enjoy the national team’s performance in the World Cup.
Thanks mainly to captain Lionel Messi, Argentina has easily gotten a spot in the last 16 of the tournament. Argentines are frothing at the mouth over the prospect that the “land-of-the-tango” might just win the cup — for the first time since 1986.
But this is Argentina. Here in South America’s second largest country, there is a tendency to realize that every silver lining has a cloud.
With foreign currency reserves going down the tubes faster than Suarez’s career, Argentina’s President Cristina Fernandez Kirchner has done everything possible — short of selling Melalucca — to keep money from running out of the country.
So desperate is Kirchner and her stable of 3rd rate economists, they put limits on internet shopping. Purchasing items online from foreign websites had become popular as a way to dealing with the skyrocketing cost of living in Argentina.
Despite all of the sophomoric attempts to keep the country from bleeding cash, the amount of foreign exchange held by the central bank has fallen by over 30 percent. At Less than $30 billion, the reserves have hit the lowest level in over eight years.
That drop hurts Argentina’s ability to take care of its debts while it finances imports. That’s not to mention the lost-confidence which international markets have in the Argentine economy.
With the possibility of a longer stay for the Argentina futbol team next door in Brazil, thousands of high-spending fans are pouring out of Argentina and taking foreign currency with them — and causing another drain on Argentina’s financial resources.
According to one independent, non-government associated economist, Perspectivas Economicas, every time a fan travels across the border for the soccer match, they take another $2,000 with them. So far about $200 million have left the country. It doesn’t matter if an Argentine gets into the game or not, they’re following their team.
For the last group game against Nigeria, Brazilian authorities figure that more than 100,000 Argentines came to the city and FIFA says that about 18,000 of those had tickets.
While Argentines’ credit card transactions overseas are subject to a nose-bleed 35 percent and US dollars and Brazilian reais are easy to buy on the black market, the impact of all those pesos going to Rio will still be felt.
Even so, the total value involved is just a small drop compared to the ocean of potential consequences of the US Supreme Court’s ruling a few weeks ago in favor of hedge fund investors. It’s a long, boring story, but it goes to the main issue of why Argentina is so short of currency these days.
The do-or-die deadline is Monday June 30. Argentina is due to make a $900 million interest payment to it’s debtors. The US court-ruling orders Argentina to settle with the bond holders by handing over a cool $1.5 billion.
The economy in Argentina has gotten so bad that even previous supporters of Kirchner and her predecessor/husband, Nestor, are now calling past achievements by the duo into question.
The current President Fernandez is due to pack up and leave Casa Rosada in October, 2015. Independent economists are expecting government spending to stay high as the next presidential election looms. With inflation running at almost 30 percent, what will happen is anyone’s guess.