Argentina must avoid ‘hot money’ pitfall: Economist

Bloomberg

An Argentine economist drafting recommendations for a more business-friendly government that could emerge from 2023 elections has a message for foreign investors eyeing potential regime change.
“We’re not interested in hot money in Argentina,” Carlos Melconian, head of think tank Ieral, said. “Capital inflows that create quick profits and get confounded with the element of confidence don’t interest us.”
Melconian, who was previously head of state-run Banco de la Nacion Argentina, is crafting an economic plan for the next government that would address Argentina’s many problems, from 100% inflation and a cobweb of currency controls to anti-business labor laws and poverty near 40%. His plan would also attempt to avoid some of the early policy mistakes of the last market-oriented administration of Mauricio Macri, who lost the 2019 elections to President Alberto Fernandez after early reforms failed to stave off a fresh crisis.
Although fine print details aren’t public yet, a few key policies are off the table in Melconian’s plan for the start of a new government. Inflation targeting and a free-floating exchange rate — two policy pillars of Macri’s first days in office in late 2015 — can’t happen after the next government takes the reins, Melconian says, calling those measures “inadequate.”
He suggests a new government make investors hold Argentine assets for a certain time period before selling to avoid the rapid fluctuations that helped fuel market volatility in Macri’s government, or “hot money” often associated with quick profits and speculation from wild currency moves.
To be clear, there’s no hot money in Argentina right now due to stifling currency controls. During the pandemic, Fernandez’s government defaulted and then restructured its debt, but with current dollar bond yields around 20%, the country is effectively locked out of international markets.