After new exchange rate pressures, Argentina expects to announce an economic package

After a week of high volatility, with the peso losing 25% of its value against the US dollar, Argentines expect the announcement of a package of economic adjustment measures in this second(3), including the reduction of the number of ministries and redundancies in the public sector. In this Sunday (2), President Mauricio Macri met his best assistants and political allies to define the change of government. And in to have(4) Argentina is starting to renegotiate the agreement with the International Monetary Fund (IMF) in June and has already been revised in the light of the new currency crisis.

"What we are experiencing is a crisis of confidence – not only in the Argentine economy and in the ability of the government to fulfill its promises in 2019, as President Mauricio Macri himself said – but also in the IMF itself as a tool to get us out of this help crisis situation, "he said Agência Brasil, the political analyst Rosendo Fraga.

The current situation is different from the transformation promised by Macri when he took over after 12 years of the governments of Nestor Kirchner (2003-2007) and Cristina Kirchner (2007-2015).

Two-digit inflation, which Macri has inherited and promised to lower, is expected to increase by 30% in December. Now, with the latest currency rush, some economists predict that it will be even bigger. In one year, the Argentine peso lost 104% against the US dollar, which works in Argentina as a thermometer of the economy. When the US currency rises, prices in Argentina follow, creating a vicious inflation cycle. And because wages are lagging behind, purchasing power is decreasing and poverty is increasing – something that the president himself has admitted.

The government also recognized that the country is on its way to a recession, with a 1% decline in gross domestic product (GDP) in 2018. Last week's decision to raise interest rates to 60% only worsened the recession. . It is the highest in the world (almost ten times larger than the Brazilian, of 6.5%). Despite the $ 50 billion loan from the IMF (the largest in the history of the country), however, the dollar only stopped rising after intervention by the Central Bank, which has sold reserves – which, according to experts, an unsustainable situation is lengthy and difficult to manage on the eve of the election year.


Argentina will hold presidential and parliamentary elections in 2019 and Macri may request a second term from the center-right coalition. Let & # 39; s Change (Let & # 39; s Change). After nearly three years of government, however, there were few changes and they did not produce the expected effect.

Macri eliminated Cristina Kirchner's exchange rate controls, reduced taxes on exports of agricultural products and minerals, and increased utility taxes, which had practically been frozen since the 2001 crisis. The goal was to attract investment to help the economy close stagnation.

"Macri did not understand that markets in the modern world do not work that way – especially in a country like Argentina that is heavily dependent on foreign currency," he said. Privacy policy the economist Alan Cibils. "The result was that the dollar, instead of coming in, dropped out, the increase in rates contributed to the escalation of inflation, which discourages investment, and the government has deepened the imbalances it has tried to keep in check. . "

The drought that has seriously affected Argentina's agricultural production and the decision by the United States to raise interest rates, raising capital that has so far taken place in emerging markets, contributed to the current Argentine crisis. This is the reason for the exchange rate race from May, for which Macri sought help from the IMF for the first time in 13 years.

Research from that time showed that six of the ten Argentinians were suspicious of the IMF's ability to solve the problems of the country. "We have experienced this a number of times and the story is always the same: the IMF calls for adjustment, the government does the employee's costs, we go into a recession and we eventually give the standard," said the retired 76-year-old Adrian Vasquez against reporters. He says that one of the children has just lost his job and the other has lowered his salary by half.


The distrust of the population has fourth(29) when Macri announced on national television that the IMF had agreed to "provide all necessary funds to ensure compliance with next year's (Argentinean) financial program." The news, given without details, and the delay that the Monetary Fund has made in confirming a new negotiation on what it just adopted in June, caused the dollar to rise from 32 pesos to 40 in two days (fourth and farm-feira).

In exchange for the loan, Argentina had promised to reduce the budget deficit from 3.9 percent of GDP in 2017 to 2.7 percent this year and to 1.3 percent in 2019. This means that both the federal government and the state and the municipal authorities, government spending should decrease. Macri has to make a political agreement with the opposition to achieve his goals – and also approve the budget in Congress, where he does not have a majority.

In parallel, the former president and current opposition members Cristina Kirchner is at the center of the corruption communication scandal – the Argentinean version of Lava Jato, which has already led to the arrest of several former workers and businessmen from the energy and construction. She accuses the government of inciting "prosecution" to distract Argentines from economic problems.

Cristina leads a part of the Peronists (main opponents of the Macrista & # 39; s). Another part of the opposition is discussing what to do, amidst the climate of uncertainty. Meetings were held during the weekend to discuss the reform of the minister. Meanwhile, the main Argentine trade union centers have already mentioned a general strike for the day 25th of September.

Announcements and rumors

According to the Argentine press, the government must eliminate 10 to 12 ministries (including science and technology, culture, energy and agro-industry, which have just fired 548 workers). Macri would also have decided to replace current chancellor Jorge Aurie with his former finance minister, Alfonso Prat Gay.

There are also rumors that he would trade the current finance minister, Nicolás Dujovne, former president of the Bank of the Nation Argentina, economist Carlos Melconian. The economic team is traveling to Washington tomorrow (3) to renegotiate the agreement with the IMF.

Source link

Leave a Reply