country risk is massive..

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    Political Risk Analysis: How Serious Is Argentina’s Economic Crisis?
    Nathaniel Parish Flannery
    Nathaniel Parish FlanneryContributor
    Leadership Strategy
    Latin America-focused political analyst
    Plaza de Mayo in Buenos Aires, Argentina
    The monument to General Belgrano and the Argentine Flag are seen in Plaza de Mayo in Buenos Aires, ... [+] CORBIS VIA GETTY IMAGES
    Argentina has been hit hard during 2020 by the Covid-19 pandemic and a new series of demand-side shocks that have pummeled an already struggling economy. Argentina has reported over 40,000 confirmed deaths from Covid-19. With inflation nearing 40% and its Central Bank short on dollars, Argentina is facing renewed pressure to devalue its currency. President Alberto Fernandez and his government are also working to renegotiate $44 billion in loans the country owes the International Monetary Fund. Nearly a third of the country’s workforce is unemployed or has given up on finding work. But, despite the constraints it faces, Argentina’s government has tried to implement policies to help citizens stay at home and contain the spread of the coronavirus. According to Martin Guzman, the country’s Finance Minister, “In a crisis in the context of a pandemic, the state plays an important role to protect the most vulnerable and co-ordinate actions to maintain stability — but that is a role that will no longer be necessary in an economy that has restored macroeconomic stability.” After reporting negative growth in 2018 and 2019, Argentina’s economy is expected to record a double-digit contraction in 2020. With the right stewardship, however, Argentina is expected to report positive growth in 2021 and 2022. So far, 2020 has been a tough year for Argentina. But, President Fernandez has a chance to implement reforms to create opportunities for renewed investment, job creation and economic growth. Foreign executives and investors looking at Argentina need to do extensive due diligence to understand the country’s political risk dynamic and outlook. To talk about what’s ahead for Argentina, I reached out to Jimena Blanco, the Research Director for the Americas at Verisk Maplecroft, a political risk consultancy.

    Nathaniel Parish Flannery: Is this economic crunch worse than other recent macroeconomic emergencies in Argentina? How worried do foreign investors need to be about this current crisis?

    Jimena Blanco: The one certainty about the Argentine economy in 2020 is that it's heading for the largest single-year contraction ever – and that says a lot given the country's long history of economic downturns. Indeed, 2020 could result in four lost decades in one year, and this is making foreign investors quite jittery.


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    The pandemic hit economies the world over, but Argentina is closing a decade of stagflation in 2020 - with at least two deep recessions during this period. The expected pronounced contraction this year threatens to take GDP per capita back to 1980 levels.

    Unlike regional peers in South America, Argentina had no savings to fall back on during the pandemic. I think that, in economic terms, the government's imposition of a quarantine for more than eight months was like trying to put out a fire with kerosene. Indeed, I expect the overall contraction to come in closer to the 15% mark than the 12% forecast by the Central Bank market survey.

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    The success of securing the restructure of the sovereign debt with private creditors now feels like a lifetime ago for the Fernández administration. The expansion of the fiscal deficit during 2020 and the risk of further FX volatility in early 2021 in the financial and black markets mean that the renegotiation with the IMF will be a difficult one in 2021. And with the government quickly running out of policy levers, foreign investors are becoming increasingly concerned with more policy announcements that impact their operations.

    Argentina GDP.
    Argentina's annual GDP growth (1980-2019). VERISK MAPLECROFT.
    Parish Flannery:What are the biggest policy obstacles that Fernandez's government will have to overcome to open the possibility for any type of meaningful medium-term recovery?

    Blanco: Fernandez's only chance to return to meaningful growth in the medium-term is for provide investors – both domestic and foreign - with legal and macroeconomic certainty. Key to this will be a successful renegotiation of the IMF bailout in 2021, which will require providing a path for the reduction of the fiscal deficit, and the gradual removal of key operating constraints on business. Among the latter are liberating the ARS/USD FX rate – even if gradually – as well as capital and import controls. In the ideal world, the government would also undertake a significant tax and labour reform to ease doing business in the country.

    So, the biggest obstacle in this regard is not policy driven – it is political. With his approval levels steadily plummeting and the social mood souring, Fernández’s needs to maintain the political support of VP Cristina Kirchner and her left-wing populist movement will fail to provide the requisite policy path clarity, and continue to trample over his moderate economic rhetoric.

    The need to bankroll major social spending programs to cater to a voting base that has been hard hit by the pandemic – Argentina's poverty rate is hovering near 50% at end-2020 – limits the prospect of meaningful tax reform in 2021. And when it comes to labor, Fernandez needs the support of the Peronist unions almost as much as he needs Kirchner.

    Approval rating data for Argentina's President Fernandez.
    Argentina President Alberto Fernández’s administration approval rating during 2020. VERISK MAPLECROFT
    Parish Flannery: Is it feasible that Argentina's government can make a serious effort to implement some necessary but potentially unpopular reforms or will short-term political concerns undermine any type of long-term economic recovery plan?

    Blanco: Fernández does not appear to have the political will to take the reins and make the tough, but necessary, policy choices the country needs to get its fiscal accounts back to where they were when he came to power in 2019. Delays will make the eventual adjustment a much harder pill to swallow.

    In the first 3 quarters of 2020, the government undid all the fiscal progress Macri made in his entire term. And if Guzman's budget proposal is to be believed, the same adjustment will be made in 2021.

    As the saying goes, actions speak louder than words. And during 2020, Fernández's actions have indicated he lacks the courage to break away with Kirchner’s politically effective, but economically unviable, populism. The government expanded outlays to increase social spending, even when its revenue collapsed, and it has failed to promote reforms that would stimulate investment in the post-pandemic economy.

    The collapse of fiscal revenue provided an opportunity to overhaul the system to ease both the tax burden and the complexity of meeting tax requirements, while incentivizing more Argentines to leave informality in the post-pandemic economy. Instead, the government created new taxes and increased the rate of existing ones to extract more from a shrinking pool of contributors.

    For instance, the levy of a purportedly one-off wealth tax has increased concerns well beyond the 9,000 taxpayers with a net worth above $2.4 million who are affected by it. The tax incentivizes evasion by concerned Argentines who fear they might fall under another 'one-off' future levy, as well as encouraging the exodus of high net-worth individuals.

    With the 2021 midterms less than a year away, I think that the government will stay clear of any reforms that jeopardize its electoral effectiveness – even if that compromises the country’s medium-term economic performance.

    Follow me on Twitter. Check out some of my other work here.
    Nathaniel Parish Flannery
    Nathaniel Parish Flannery
    I am a Latin America focused political analyst and writer. I split my time between New York City and Mexico City. My book, Searching For Modern Mexico, was published in… Read More
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    Major holder nvx dumped shares..

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    The insiders are selling into ramp ?

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    The lithium market is over-heated, and accordingly you will find the insiders cashing out with great profits.

    The bag-holders will have to hold for a while till the insiders decide to enter the market again at much lower prices.

    Example of insider bailing/cashing-out at the top - NVX Ann:

    “Philip St Baker and Peta St Baker as trustees for the P&P St Baker Family Trust (ABN 52 215 564 877) (P&P Trust) AND Monte Vista Holdings Pty Ltd (ACN 120 059 092) as trustee for Ouray Super Fund (ABN 63 473 919 719) AND Philip St Baker AND Peta St Baker

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    most over hyped pumped stock on a sienfeld story for a long time careful dyor

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    {$4.88; 5; 1.04%} Peter Arden notes much improved Dec qtr.Olaroz prod’n+58%qoq & unit costs down 9% to 3 yr low. With rebound in Li prices, they even ekedout a small positive cash margin of SU$174/t. Expansion plans continue with Olaroz~50% complete & Naraha ~89% complete. They have begun scoping study on OlarozStage 3, & had initial discussions with partner on expansion of Naraha. Revisions toour Li & FX assumptions sees much improved earnings forecasts but still expectinglosses through Fy23 making recent all things Li inspired stock price rally lookoverdone.
    Peter downgrades to SELL.

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    way way over valued ..big time dyor..

    1 like
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    massive sell dyor massive

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    its a bubble bubble territory ..dyor

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    Mineral Resources paid a final tax instalment of $332 million on the sale of a 60 per cent share of it Wodgina lithium mine to US battery metals giant Albemarle. Wodgina has been in care and maintenance since the sale was finalised in November 2019.

    Mineral Resources continues to operate the Mt Marion mine, where its partner is China’s Jiangxi Ganfeng, but noted lithium prices had continued to fall in the six months to December 31.

    The company received an average price of $459 a tonne for spodumene concentrate, a fall of 50 per cent on same period last year and down from prices up around $US930.80 ($1203) a tonne two years ago.

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    all stocks re test CR issue prices for lke 16.5 ... be careful its over cooked..

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    Last June i bought Tesla Puts SP was about $400. I made money on a couple but over all had loses. I recently Started buying Puts. Deeply out of money, which I usually do not do and at least 5 to 9 months out. I would like to share an observation. Puts in Tesla are going up in value like crazy. a I have June and September put that are $300 ~ $400 out of money. Normally I would expect them to go up maybe 0.10 for every $1.00 Tesla falls. Most have been going up at least 0.30 which is a true indication that some expect a big decline.

    Volume Tesla Volume is running about half of what it was 3 weeks ago. While the stock has fallen a little. This indicates buyers are drying up but sellers are staying calm. If sellers start to sell the rate of decline will accelerate.

    Why is this important to me? it is because I see many similarities to Dot Com and banking crisis. today Tesla is Flag ship of the green revolution. Its market Cap and PE are ridiculous as were the Flag ships of the two previous collapses. In those two previous collapses the Flag ships fell first. slowly at first with low volume. put prices and volume rose first Call volume rose. In dot com it was Amazon eBay ATT ( note the Cell company with ATT name to day is just something sold off after the ATT collapse) Northern telecom. gone as well. and many others. In banks it was Merrill lynch now a division of BOA Solomon brothers. the whole county of Ice land.

    Could Tesla come roaring back on 50M ~ 100M shares a day and go above $900 next week? Yes it could it did it to me six months ago. But many of you have great gains I would suggest you watch the stock of the leaders of the green revolution

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    heading to 1.2 bill shares dilution city.. any value gets diluted by a low grade board dyor good luck,

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    buy rumor sell fact..mkt knows and priced in lilac ..nvx news hence stock has gone fro 4 to 40... its a baked cake dyor..,

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    The expansion of lithium projects, particularly when you factor in commercialisation of new technology, has a very low success rate in the lithium market. Even major producers typically come in behind schedule and over budget."

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    bubble bubble dyor

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