JANUARY 9, 2002
Argentine economy crisis to hit Brazil?
The world economy is a complicated concept but analysts around the world are predicting that Argentina's decision to devalue the peso by 30% is going to have an effect on the value of the Brazilian real.
THE world economy is a complicated concept but analysts around the world are predicting that Argentina's decision to devalue the peso by 30% is going to have an effect on the value of the Brazilian real. The peso is expected to continue to fall in value against the dollar as the market decides what the Argentine currency is actually worth. There are strong economic links between Brazil and Argentina. The good news is that there will be much more incentive for foreign visitors and investment as it is now much cheaper than was previously the case. The big winners are the Argentine companies which are exporting abroad as they will become much more competitive while local businesses will also benefit from less competition as importing goods into Argentina will offer smaller rewards.
The bad news is that foreign-owned utility companies, oil companies and banks are going to take a big hit as their incomes have, effectively, been reduced by 30% overnight. It is estimated that this is going to cost companies about $15bn in total with the Brazilian and Spanish economies taking the biggest hits. Amongst the biggest losers will be Telefonica and Repsol. Several car companies are also going to be affected as well but on a global scale this should not be too much of a problem.