8 keys to understanding Argentina’s economy and markets

Analysts think about Argentina’s economy in times of financial crisis and political tension, just over a month after the general presidential elections, in the context of a recessive economy, high inflation and exchange restrictions.

The Monetary Policy Committee (COPOM) of the central bank (BCRA) raised the floor of the Liquidity Letters rate (‘Leliq’) to 78%, while the Government sent to Congress a project that establishes procedures to renegotiate the bonds issued under Local law with your creditors.

This week the Minister of Finance, Hernán Lacunza, and the head of the BCRA, Guido Sandleris, will be in the United States where they will seek to unlock a pending contribution from the International Monetary Fund (IMF).

1) “The presentation of the debt rebalancing project opens expectations among investors, hence the positive (recent) reaction in bond quotes, beyond that they still do not know if they will have the necessary political support to implement”, said Gustavo Ber, senior economist at the consultancy Estudio Ber.

2) He added that “this is due to the fact that the current parities of public securities would imply a ‘recovery-value’ (recovery value) more oriented towards a restructuring, which could include not only an extension of terms but also a take away of capital and / or interest. ”

3) The economist Aldo Abram sees a difficult path for the next months in Argentina, including a possible tightening of the exchange ‘stocks’, virtual problems to fulfill the obligations contracted and potential disorderly dollarization, all occurring perhaps before December, said the Freedom and Progress research center.

4) “One month after the first (electoral) round, everything in economics is short term,” said a document prepared by the IAE Economics Area, Universidad Austral, where it was pointed out that small and medium-sized enterprises are “facing a uncertain scenario in the recession. ”

5) “The industry showed a 3% drop in the year-on-year comparison in August,” said a report from the Latin American Economic Research Foundation (FIEL), who emphasized that “the end of the crisis will come with confidence and the horizon”.

6) “The GDP achieved an increase of 0.6% year-on-year in the second quarter of 2019, so it was far from compensating for the fall of the first part of the year – a fall of 5.6% year-on-year, concluding the first half with a contraction of 2.5%. In line with this deterioration, according to the ‘Permanent Household Survey’ (EPH) the unemployment rate reached 10.6% during the second quarter of the year, “said the consultant Ecolatina.

7) The latest GDP data “show that the economy, although it was not growing before the PASS (primary elections), had slowed its rate of decline and was moving on a floor from which to bounce. The electoral shock changed the panorama, and new falls are expected for the third and fourth quarter, “Invecq consultant projected.

8) “While oil production is concentrated, gas production is diversified,” said the Invenomic consultancy. “In the last 10 years the Argentine gas and oil sector has undergone a process of business concentration in the production phase -‘upstream’-, where this reality was strongly exacerbated in the oil sector … but it has been reversing in gas production, “he added.