[quote=Dr. Peter DeWitt, Feb. 2000]
The Easiest 9.5% You’ll Ever Make
Here’s the opportunity we’re talking about: Argentina Treasury bills.
In the States, T-bills pay about 5.5 percent. They’re considered completely “risk-free”? securities… easy money in the bank.
It’s the same in Argentina. Their currency is fixed with the U.S. dollar, one-to-one, every single day. By constitutional law, money invested in Argentina is always on par with your U.S. dollar. But the Argentine T-bills we’re currently recommending have a much higher yield than their U.S. counterparts—around 9.5 percent.
In fact, you have only two small risks in Argentine T-bills. First, if the Argentine government decides to stop fixing the currency one-to-one with the U.S. dollar. And second, if Argentina decides not to pay its debts.
Neither of these will happen. Here’s why: Argentina’s fixed exchange rate is the best thing that ever happened to them.
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Why The “Pro’s”? Don’t Get It
Argentina has one man to thank for it’s current health — Domingo Cavallo. In 1991, he set the suffering people of Argentina free from monetary mismanagement when the currency board was instituted.
Cavallo knew that central banking is central planning. And if there was one lesson of the 20th century, it’s that central planning doesn’t work. Look no further than Russia.
Since Argentina’s currency board began, financial markets have been skeptical about its durability. Many market “pros”? think devaluation is possible. These same pros don’t understand how well Argentina’s monetary system works…they see danger where none exists.
The pros will furthur argue that giving up your own currency hampers a country’s economic freedom. That’s certainly not the case here. Rather than hampering freedom, Argentina’s economic freedom ranking has improved more than any other country in the world in the 1990s—from 59th in 1990, up to 7th in 1997. Now, only six countries in the world rank above Argentina.
The fact is, the Argentine peso currency board has withstood the most violent problems possible, from the Asian crisis in 1997 to the Tequila (Mexican peso) Crisis in 1995, and all without a scratch.[/quote]
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[/align]Dr. Peter DeWitt is the author of “The Inter-American Development Bank”? and “Political Influence and Political Apathy in Argentina.”? He has been an Organization of the American States Fellow in Costa Rica and has published numerous articles on the international debt crisis and international business.