A fragile Argentina is again in line with the doors of the IMF



The Argentinian minister Nicolás Dujovne will travel to Washington on Monday to determine the conditions for a new bailout from the IMF after a week of hectic weightlifting that has shown the economic and political vulnerability of the country.

The currency crisis that began in April reached a climax last week when the peso recorded a 20% write-off against the dollar in two days before a timed recovery on Friday after a 60% increase in interest rates and million-dollar sales of the Central Bank under the expectation of announcements next week.

"Investor confidence in Argentina is still fragile," warns a Capital Economics document.

In his weekly report, the international consulting firm points out that "there is a notorious risk that the government will fail to submit a mandatory austerity plan" on Monday when Dujovne announcements are expected for the trip to Washington.

"This would be a clear risk for even more weight loss," he warns.

The currency plummeted after President Mauricio Macri's announcement by President Mauricio Macri on a nationwide network that he had requested an advance of IMF assistance.

The reaction of the market revealed the extent of the crisis of confidence in the government and its ability to pay off the debt with the possibility of a new recession, quoted by analysts.

Uncertainty frightens Argentinians, in a scenario of inflation of nearly 20% in July and an accumulated devaluation of the currency of 50% since January.

To calm markets, Macri urged the IMF to "advance all necessary funds" of the $ 50 billion triennial deal announced in June.

He therefore expects to cover the financial needs of 2019 when his term ends.

After the announcement of the president, the currency rally went deep and the Argentine currency was sold on Thursday against 41 dollars.

"It was a misstep by Macri," says sociologist Marcos Novaro, who predicts changes in the ministry after the financial turmoil.

Argentina has committed to the IMF in June to reduce the deficit to 1.3% in 2019, but the local media speculate on a more radical adjustment to reduce it to 0.4% next year.

Since Macri's seizure of power in December 2015, the Macri center-right government has drastically reduced public spending with the aim of subsidies, redundancies and freezing of government procurement, alongside other fiscal adjustment measures.

But it also benefited from a tax cut for the export of agricultural products, such as the emergency it threw into the eye.

Tuesday is expected that Dujovne IMF Director Christine Lagarde will present the details of the new commitment of Argentina in exchange for accelerated payments. Since June the country has received 15 billion dollars and last week another 3 billion.

"But it is unclear whether it will be enough to stabilize the finances," says analyst Jim Reid of Deutsche Bank.

The currency crisis brought land risk to nearly 800 points, the second largest in the region, behind only Venezuela.

– Exhausted –

Exchange hysteria and its consequences for prices have left the Argentines exhausted, and recall the trauma of the economic crisis of 2001.

Although the financial circumstances are very different, the fear of Argentinians is similar and pessimism about the future of the economy increases

The CGT, the country's main trade union center, called for a general strike on 25 September to show a change in the economic direction.

Rising food, transportation, basic services and education prices are related to the fear of job losses, a fear that affects 50% of employees, according to a study by the Center for Labor and Development Studies (CETyD).

* AFP


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