The Argentine economy crisis deepens with pessimistic expectations, especially in the face of the inability to pay the super-sized sovereign debt, in light of fears of the continued decline in the price of the local currency, and the matter came that he got the largest funding from the IMF at all, confirmed the new Argentine president from the left of the center Alberto Fernandez in his inauguration speech that his country “wants to pay” its external debt but “does not have the means to do so,” calling on the International Monetary Fund to develop a “constructive relationship”, and Fernandez said that the government of former liberal president Mauricio Macri “left the country in a position of virtual deficit “With a public debt of approximately 315 billion d Wallar, or about one hundred percent of the gross domestic product.
In 2018, the Argentine Monetary Fund granted a loan of $ 57 billion over three years, but the President-elect decided not to receive the last installment of this loan of $ 11 billion in order to revive economic activity, while the Fund expected that this activity would decline by 3.1 percent this year. In addition to the decline in gross domestic product, Argentina is expected to end this year with inflation of approximately 55 percent, poverty rate of close to forty percent, unemployment by 10.4 percent, with a currency price collapse of forty percent, and during his four-year tenure, Macri succeeded In reducing the public deficit from five percent to 0.5 in pain A percentage of the gross domestic product.
The inflation rate is 55 percent
The recent estimates of the Central Bank of Argentina stated that the rate of inflation in this country located in South America will reach 55 percent this year, while the gross domestic product will record a decline of 2.5 percent, and this financial institution expected before these estimates, that the inflation rate would reach forty percent The rate of deflation is 1.4 percent, and these estimates were published, while the Buenos Aires Stock Exchange declined by 11.9 percent, on the second day of the start of the application of monitoring the currency exchange rates imposed by the government on companies and individuals to try to reassure markets and savers.
The decree published in the Official Gazette imposes on the exporting companies the conversion of the dollar into the national currency of the bezos during a specific period of between five and 15 working days after receiving the amounts, or within 180 days from the date of export of the goods, and individuals cannot transfer any amount exceeding ten thousand dollars or Foreign currency purchases greater than this amount without the approval of the Argentine Central Bank.
The Argentine economy has been shrinking since the second quarter of 2018, and the Argentine currency has lost twenty percent of its value in the past three weeks, while the central bank has lost more than 12 billion pesos of its reserves, as the country is witnessing a decline in consumption, the dumping of shops and an increase in the poverty rate (32 percent in 2018) and unemployment (10.1 percent this year), and the central bank expects GDP to drop by 1.1 percent in 2020, which contrasts with its previous estimates and reported a growth of 2 percent.
Capital flow management
A spokesman said that the International Monetary Fund is analyzing the details of the measures taken by Argentina to “manage the flow of capital” and the spokesman said “the fund will remain in close contact with the authorities in the coming period and will continue to stand with Argentina during these difficult times” and the Argentine government said in a decree of its official publication The Central Bank is authorized to restrict the purchase of the dollar.
Treasury Minister Hernan Lacuna has said that Argentina will negotiate with holders of its international bonds and the International Monetary Fund to extend the deadlines of its debt obligations as a way to ensure the country’s ability to pay, and concerns have grown over Argentina’s ability to meet its dollar-denominated debt obligations since the peso was hit hard by political uncertainty after the elections. The introductory event that took place and the Argentine currency lost 22 percent of its value against the dollar.
Argentinians withdraw their money from banks
Brazilian President Jair Bolsonaro announced that Argentines are withdrawing their money from their country’s banks in huge quantities in anticipation of the victory of the Peruvian left-wing candidate Alberto Fernandez in the presidential elections, and the far-right president said in a tweet on Twitter “with the possibility of the return of the Sao Paulo Forum squad (which brings together left-wing parties in Latin America” ) In Argentina, people are withdrawing their money from banks in huge quantities. “
Bolsonaro expressed his fear of a mass exodus of Argentines to his country if confirmed in the presidential elections scheduled in Argentina, and the defeat suffered by the primaries, liberal President Maurizio Macri, and for Bolsonaro, the return of Kirchner to the summit of the state may “put Argentina on the same path as Venezuela” , Which is currently suffering from a serious political and economic crisis headed by socialist Nicholas Maduro.
The far-right president expressed his fear of the influx of Argentine immigrants into his country, just as it is for Venezuelans who are fleeing thousands from their country plunged into a dangerous economic and political crisis to neighboring countries, especially to Colombia and Brazil, but Bolsonaro received a strong response from Alberto Fernandez who said ” I am happy that he is talking about me, he is racist, violent and hateful of women. ”According to Brazilian analysts, Bolsonaro’s remarks are an unprecedented interference by a Brazilian president in the domestic politics of Argentina, the neighboring country that is one of Brazil’s largest trading partners.
Messy peso falling
New Treasury Secretary Hernan Lacuna said that Argentina will not allow a chaotic depreciation of the peso and will use its dollar reserves to support the local currency in the face of political uncertainty that has swept the country since the primaries, and the peso closed 0.53 percent down at 55.03 against the US dollar while the prices of shares and local bonds rose slightly, This indicates that the recent market turmoil has started to subside.
The Argentine currency and the stock and bond market plunged after the primaries that indicated that left-wing opposition candidate Alberto Fernandez would have an easy victory over center-right President Mauricio Macri in the presidential election, which raises fears of a return to intervention policies in the economy, and the Argentine Central Bank sold 27 million Dollars of its reserves on Wednesday afternoon with an average price of 56.9863 pesos per dollar, and traders said that the central bank sold in its interventions a total of 641 million dollars of its dollar reserves.
Argentine Treasury Minister Nicholas Duchovny resigned from his post, said in a letter that he saw the government need a “major renewal” in its economic team in light of the crisis that saw the peso fall, and Duchovni said in a letter to Argentine President Mauricio Macri that he gave his energy to his work and contributed to reducing the large deficit and reducing From public spending, he added, “We made mistakes too, no doubt, and we never hesitated to admit it and made every effort to correct it.”
The poverty rate rose to 32 percent
The poverty rate in Argentina rose to about a third in the second half of 2018, as the South American country was affected by the economic recession, a sharp drop in the value of its currency (the peso), and the rise of inflation at a faster rate than wages. The Argentine Statistics Agency said that the poverty rate among the population reached 32 Percent, up from 27.3 percent in the first half of 2018, and the percentage of those living in extreme poverty also increased to 6.7 percent from 4.9 percent.
Last year, Argentina was rocked by what President Mauricio Macri called economic storms that prompted the country to conclude a 56.3 billion dollar financing agreement with the International Monetary Fund. Under this agreement, Macri pledged to cut government spending and increases in utility prices, policies that sparked street protests in the capital, Buenos Aires and cities. Others across the country. Economic turmoil has caused severe damage to small businesses and individuals, with inflation rising to an annual rate above 50 percent, sharp increases in interest rates, diminishing access to credit and a sharp devaluation of the peso against the US dollar.
International Monetary Fund: financing of about $ 56.3 billion
The International Monetary Fund agreed to increase the volume of conditional financing for Argentina to about $ 56.3 billion with the tightening of fiscal measures included in a previous agreement, and the government of Argentine President Mauricio Macri had reached an agreement with the International Monetary Fund worth $ 50 billion in the hope that it would stop a sharp wave of sales in the currency The local peso, but the peso continued to decline, forcing Macri to renegotiate the agreement and after a meeting of the Board of Directors of the IMF issued a brief statement that does not specify the terms of the revised financing agreement.
Argentina said the new deal would commit the government to sharper spending cuts and a further tax increase to cut the initial budget deficit, which is expected to reach 2.7 percent of GDP in 2018, to zero next year. Macri is seeking to win a second presidential term in elections in late 2019, and in a letter to the IMF, Argentina said it expects inflation to peak at levels above 40 percent in January and then fall at a rapid pace in 2019, and the letter also said that Argentina expects to The economy shrank between 2 to 3 percent in 2018.
“We expect the recession to continue in the remainder of 2018 and in the first quarter of 2019, with a recovery beginning in the second quarter of next year,” said Monetary Fund official, Christine Lagarde, Executive Director of the Fund, said a proposed federal budget for 2019 approved by the Congress of Representatives in Argentina will help the government achieve its goals, “she said in a statement,” issuing it in a law will be an important factor to restore confidence. “
Imposition of austerity budget
In the first reading of the austerity budget draft presented by the government in 2019, the Argentine parliament approved the first goal of completely eliminating the trade deficit in accordance with an agreement in this regard with the International Monetary Fund, and at dawn and after 18 hours of discussion and incidents between demonstrators and the police in front of the parliament, the draft budget was adopted by a majority of 138 deputies compared to 103 Representatives against and eight abstentions, and the bill still needs the approval of the Senate. Mario Negri, head of the ruling coalition’s caucus, said: “We are in crisis and the government must shoulder its responsibilities, social unrest, and recession compel us to vote on this law today.”
In the face of the economic crisis, the government of President Mauricio Macri (right center) obtained a $ 57 billion loan from the International Monetary Fund to try to stabilize the third economy in Latin America, where the currency collapsed by 50 percent against the dollar since the beginning of 2018, and in exchange for the loan The government pledged to approve an austerity budget, and the government reduced the initial trade deficit (without loan surplus) from 6 percent in 2015 to 3.9 percent in 2017, and is expected to shrink more in 2018 from the government’s goal of 2.7 percent.
Argentines have faced 40 percent inflation in the last 12 months, an unemployment crisis due to layoffs in the public and private sectors and a significant decline in purchasing power. In this country of 44 million people, purchasing power has declined a lot and an increasing section of the population opposes the government’s economic policy.
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