Monetary Matters with Jack Farley Fiscal Decay, EM Parallels, and What’s Next for the Dollar | Nicolás Dujovne
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May 23, 2025 
Nicolás Dujovne, former Treasury Minister of Argentina and founder of Tenac Asset Management, dives deep into the intricacies of emerging market economies. He discusses the parallels between U.S. fiscal issues and those faced by emerging markets, while clarifying why the U.S. doesn't fully resemble an emerging market. Dujovne highlights the risks and rewards of investing in EM debt, and shares his thoughts on the weakening dollar. He also points to promising opportunities for investors navigating this complex landscape, making a compelling case for including EM debt in portfolios.
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Argentina's Dollar Dependency Problem
- Argentina's economy heavily depends on global conditions due to its small local capital market.
- Building a local currency capital market is crucial for reducing external shocks and dependency on dollar debt.
Argentine Fiscal Deficit Roots
- Argentina's fiscal deficit was driven by excessive government spending, nearly doubling from 25% to 42% of GDP by 2015.
- Despite efforts to reduce this, external shocks and Fed rate hikes pressured Argentina's debt sustainability.
Why Argentina Faces High Inflation
- Unlike countries like the U.S. and Japan, Argentina finances deficits by printing money instead of issuing debt.
- This creates inflationary pressures, risking hyperinflation unless fiscal credibility is restored.