ALEX BRUMMER: Argentina has nothing to lose by trying daredevil economics

Argentina is the example of a failed economy in the world.

Blessed with abundant natural resources such as grain, shale gas, lithium and a talented population, including a great national football team, it has produced nothing but disappointment.

Currently facing the prospect of its tenth sovereign debt default in modern times, a forecast of 185 percent inflation by the end of this year, the country has witnessed four in ten residents living in poverty have ended up.

Populist newly elected President Javier Milei has the unenviable task of solving this problem. He must not despair.

With the right policies and governance, countries come back from the dead, as Greece has shown over the past decade.

Unfortunately for Argentina, the country lacks the support of the European Union to save it from oblivion, but does have the International Monetary Fund (already owed £36 billion) and the Inter-American Development Bank to provide financing and advice.

Milei can be considered radical, but his ideas are not without merit.

When your country has a currency as distrustful as the peso, which trades on most exchanges at twice the official price of 350 pesos per dollar, finding an anchor makes sense. Disastrously, El Salvador in Central America chose bitcoin!

Milei wants to adopt the dollar. That may not be as crazy as it seems. Hong Kong’s economic and financial independence from its parent country Beijing was based on its link with the dollar.

If the Argentine president-elect goes through with his plan, it will almost certainly mean a massive devaluation so that Buenos Aires can join the dollar.

It would simplify the country’s trading relationship with the rest of the world and potentially keep it out of China’s clutches.

One of Milei’s other proposals is the abolition of the central bank, which would presumably allow interest rates to be set in Washington.

It would certainly be popular to break away from a base rate of 133 percent. But like Hong Kong, the country will need a credible monetary authority if the dollar policy is to continue.

Recent studies show that what the Economist magazine called “risky” economics can work.

That means reducing the size of the state and liberalizing it by removing trade barriers and currency controls. Given Argentina’s checkered past, the country has little to lose.

Food chain

The first reaction to the results of British catering champion Compass was to write down the shares.

Yet in most respects Compass is exactly the kind of innovative multinational that is an asset to the UK services sector.

In the just-ended financial year, operating profit rose 30 percent to £2.12 billion, despite having to grapple with the last vestiges of working from home in the biggest US market. More of the same is promised in 2024, but with less momentum.

The company is experiencing rapid growth in the US, which accounts for approximately two-thirds of sales. As well as the more mundane work of catering for offices and universities, it has an impressive events franchise.

One of the accomplishments was providing food services during America’s Sports Equinox, when the NFL, NBA, Major League Soccer and NHL all held major games on the same night – October 30. Here in Britain it hosts Wimbledon.

There was some dissatisfaction among analysts that chief executive Dominic Blakemore limited the latest buyback to $500 million (£413 million).

The company’s aim was to prioritize returning to shareholders the £2 billion in rights issue funding it raised in May 2020 amid lockdowns on both sides of the Atlantic. Blakemore would like to keep some money behind the clock for future investments and acquisitions.

It is better that a British group worth £35 billion is the buyer rather than being bought, and that the listing remains firmly anchored in London.

Sporting opportunity

Cricket may have conquered Afghanistan, but so far Saudi Arabia is not hopeful for a future World Cup.

That doesn’t hinder his style when it comes to sports investments. Advisors to Mohammed bin Salman, undeterred by Australia’s triumph, have begun talks with India’s Board of Control for Cricket about acquiring a $5 billion (£4.1 billion) stake in the $30 billion Indian Premier League ( £25 billion).

It will join a portfolio that includes Newcastle United, LIV Golf and the PGA Tour, luring heavyweight boxers from Las Vegas to Riyadh.