The Argentine Headache

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Argentina is on the brink of a financial crisis once again. Current leader Mauricio Macri’s loss to  left-wing opponent Alberto Fernandez in the primary election has caused a swarm of financial repercussions. The S&P Merval, Argentina’s main stock market plunged 48% on Monday. It was then second largest drop of any major stock index since 1950. The Argentine peso dropped 15% versus the US dollar on Monday as well. These losses extended on Tuesday. The wide margin of Macri’s loss is what triggered the financial earthquake. Investors were expecting him to be defeated, yet not to the extent that he was.

Now the future appears uncertain. The looming probability of a sovereign default on the country’s IMF loans is sending investors scrambling for cover. The emerging political scenario is causing concern around South America and beyond. Should the Peronists return to power, Argentina will once again be ruled by a leftist government. Brazil’s right-wing President Jair Bolsonaro is publicly warning of a possible Argentine refugee crisis affecting his country in the future. Brazil is already contending with waves of Venezuelan immigrants streaming into the northern region of the country, fleeing the economic and political crises in their homeland. The possibility of a second refugee crisis at Brazil’s southern border is unpalatable to say the least.

After the downturn in global markets yesterday stemming from global recession fears, it would appear that the Argentine headache will add to the increasing concerns among investors about the health of the global economy, as well as the growing influence that the geopolitical climate has on markets and national economies this summer.

6 August, 2019 World Brief: Kashmir, Turkey, US-China Trade War

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The beginning of the week has been a volatile one across the world from the Middle East to Asia. I am coming off of a long weekend and feel the best way to begin the week on here is with a brief on some of the world’s brightest flashpoints at the moment.

 

Kashmir

The Indian government has decided to fully incorporate the Muslim-majority state of Jammu and Kashmir (J&K) into the nation. It will become a union territory and the central government in New Delhi will assume considerably more control over the state’s affairs. The Kashmir region has enjoyed almost full autonomous authority since 1949. Article 370 of the Indian Constitution, the section of the document allowing J&K to conduct its own affairs, will be scrapped. Last week, a buildup of army troops, and paramilitary police in Kashmir, coupled with government warnings for visitors to leave the region immediately, foreshadowed Monday’s announcement. Unrest is expected and will likely occur. The growing concern in the region and around the world is what Pakistan’s reaction will be to India’s move. It will likely intensify tension between the rivals, who have fought multiple wars over the Kashmir region in the past. The Pakistani government has called for a joint session of the nation’s parliament today, and the military leadership has begun discussions on ‘regional security.’

 

Turkey Prepares for Syrian Offensive

Turkey has started moving forces onto its border with northwestern Syria as a major offensive against the US-backed Syrian Kurdish forces in that area becomes likely. A military move against the Kurds by Turkey will significantly ramp up already high tensions between Ankara and Washington. A delegation of US military officials is presently in Turkey and conducting talks aimed at heading off the Turkish offensive. Whether or not the Turks heed the US warning remains to be seen.

 

US-China Trade War

Following a sudden, and sharp drop of the yuan against the dollar, the US Treasury has designated China as a currency manipulator. The exchange is the latest as the US-China Trade War shows no signs of letting up anytime soon. The US viewed the drop in the yuan’s value as a deliberate move by Beijing to make China’s products cheaper on the international market and circumvent US tariffs. Stock indexes around the world reacted negatively to the Chinese action, and the US label, especially Wall Street which saw its worst trading day of the year. Today, China’s central bank set the yuan’s official position above the 7 yuan-to-the-dollar mark, bringing it out of currency manipulation territory and calming world markets. It is becoming clear, however, that the US-China Trade War will likely escalate further before it calms.