What's going on?

While Brazil�s government and economy are struggling mightily, Argentina seems to be turning itself around: it�s set to complete the biggest sale of bonds (see below what that means) by an emerging market country in over 15 years.

What does this mean?

Virtually all countries borrow money from investors by selling them bonds (you can check out our explanation here). Government bonds of smaller, riskier countries are very different from bonds of big, developed countries. While the risk of the US government not paying you back is minuscule, the risk that Argentina fails to repay you is reasonably high (in fact, they�ve defaulted seven times). This is partly because Argentina borrows a lot of US dollars (see our new �Read More� section below), while the vast majority of its income and wealth is in Argentine pesos. So, if the Argentine peso were to lose a lot of its value, Argentina would really struggle to pay back its US-dollar denominated debt.

Why should I care?

For markets: This is exactly why a weaker US dollar is helping emerging market investments go higher right now. From roughly 2009-2012, small, risky countries and companies in those countries borrowed a lot of US dollars. The time has come for them to repay much of that money and a lower US dollar makes that easier to do. As the risk of not paying back their debt is lessened, the currencies of those countries and the stocks of the companies typically increase in value.

The bigger picture: Is Argentina showing Brazil the way forward? Back in November, Mauricio Macri was elected as Argentina�s new President. The Argentine markets rallied sharply as Macri had a reputation of being business-friendly and economically prudent � and, so far, he has delivered. Brazil, as we reported yesterday, is going through its own potential political upheaval amidst a horrible economy. In order to stabilize and improve its finances and economy, it might want to peek southward for some guidance.