The Argentine crisis in peso is primarily a crisis of confidence, coupled with the longing for the dollar, the local currency that is falling rapidly – more than 50% since January – and also because of the trauma of the economic crisis of 2001.
While Argentina is hosting the G20 this year, the vulnerability of its economy is obvious.
Crisis or trust
In Argentina the savings are in dollars. The Argentines have no longer trusted their currencies since the great devaluation of 1975, the Rodrigazo & # 39; hyperinflation of the late 1980s and the 2001 default that caused an economic crisis.
"The dollar is the reserve currency par excellence, used by the Argentineans to keep the value of their savings in the long term, and the demand is growing in times of uncertainty and decline in calm weather", says Victor Beker, the director of the center. of the new economic studies (CENE).
– Chronic budget deficit –
For decades the budget deficit has been a recurring problem in Argentina. The percentage of public employees is one of the highest in the world.
The government of center-right president Mauricio Macri has undertaken to clean up the country's accounts. The deficit went from 6% in 2015 to 3.9% in 2017. But the road is still long: the target for next year is 1.3%, then the balance is in 2020.
The Argentine president has the reduction of the budget deficit as a top priority & # 39; from his government.
Economist Mario Blejer notes that "the government has corrected (imbalances), but the effects do not appear quickly (…) I think it is possible that the economy will work well next year".
– Far from 2001 –
The economic crisis of 2001/2002 is a trauma for the Argentinians, many have lost their jobs, sometimes their savings and poverty have exploded, after a decade of parity peso-dollar, a golden time for the Argentines but they have led to the bankruptcy of the country. The members of the government ensure that no comparison is possible. The Minister of Economy says there is "no risk" for a new standard.
The boss of the HSBC bank in Argentina, Gabriel Martino, excludes the possibility of a new standard. "If we approach Argentina from an economic point of view and analyze what the previous crises have caused, the conditions are positive, the provinces have a surplus of fiscal resources, the banks are healthy and they have good capital, the government is working on a zero deficit as soon as possible. and the liquidity problem is solved by the agreement with the IMF. "
Economist Javier Milei believes that Argentina can fall back into a phase of hyperinflation due to the current peso crisis.
– IMF support –
Unable to lend matches due to a high country risk (more than 700 points), the third largest economy in Latin America has signed a plan to stabilize the economy with a loan of 50 billion dollars.
Political scientist Rosendo Fraga notes that the IMF has explicitly supported the government in recent months and that the United States has approved the measures taken by Argentina.
This agreement, which has the usual painful counterparts, was poorly received, because many Argentines believe that the IMF contributed to the default of 2001 by supporting the expensive peso-dollar parity policy supported by the former president. Carlos Menem.
– Political vulnerability –
Prime Minister Marcos Pena rejects "economic failure", the president demands patience and points out that "the process of transformation and standardization of the country" takes longer than expected.
A little over a year after the presidential election, Mauricio Macri is no longer in a position if he was at the end of 2017, after winning the interim elections, without his coalition Cambiemos (Let's change) creates a parliamentary majority.
So far he has used the Peronist opposition division, between supporters of former left-wing President Cristina Kirchner and a more moderate sector. At the time of the vote on the budget for 2019, which will have to incorporate austerity measures, it will probably be difficult to get a majority.