LA NACIÓN – Carlos Manzoni – When the tide goes out, it is discovered who was swimming naked. This phrase coined by the American investor and businessman Warren Buffett can be applied to Argentina: although the waters of the Coronavirus pandemic that began to show its effects a year ago have not yet withdrawn, it can already be seen that the country went through the crisis of the Covid-19 with “little clothes” and, therefore, suffered a severe blow in economic, social and health terms.
Indeed, unlike what happened in the vast majority of countries, the coronavirus surprises Argentina with a macroeconomy full of imbalances, with a chronic fiscal deficit, with a pressing shortage of dollars and with a terrible image before foreign investors. among other issues.
Iván Cachanosky, an economist at Fundación Libertad y Progreso, points out that in the year that elapses from March 2020 to March of this year, the Argentine economy fell 10%, more than any country in the region (except Peru, which fell 11%). “They were all affected by the pandemic, but the difference in the case of Argentina lies in the fact that it has been carrying structural imbalances for 60 years, of which 50 had suffered with a fiscal deficit. So, in the face of any extra adversity, it suffers more than the rest”, explains the specialist.
The consulting firm Abeceb expressed in numbers the economic nudity that the coronavirus revealed. In a report entitled “Generalized deterioration that will strongly condition 2021”, it details that in this pandemic year the GDP fell 10%, inflation closed at 36.1% (almost 18 points less than in 2019, but sustained by controls of all kinds and due to the pandemic effect itself), the primary deficit was 6.5%, the country risk climbed to 1,400 points and the exchange gap amounted to 85%. All this amid a loss of reserves of US$ 5 billion. In addition, according to the latest Indec data, unemployment reached 11.7% (in the third quarter of 2020) and poverty, 40.9% (first semester 2020).
In this context, the impact on the sectors of the economy was heterogeneous, since although all were harmed, some suffered more than others. Victoria Giarrizzo, economist, director of CERX and researcher at the IIEP of the UBA, points out that the three sectors hardest hit by the health crisis were gastronomy, hotels and construction. “In April and May there was almost no activity and this situation lasted until September. It only started to recover from October, but very slowly, thus rounding out a 48% drop. Hotels had a similar decline and construction, although it recovered a little when the restriction was cut, fell 25% in the year”, she comments.
On the other hand, what were the least punished items? According to the analysts consulted, electronic commerce, financial intermediation (one of the few sectors that grew in 2020), food and beverages, and energy must be placed on that list.
When taking stock of this pandemic year, the economist Camilo Tiscornia, director of the consultancy C&T Asesores Económica, believes that, in general, the result is negative, especially in the macroeconomic sphere. “From where you look at it, the results have been bad. They have been bad in all countries, but here they were worse. The 10% drop in GDP was one of the worst in the world. Obviously, it has a lot to do with the way in which the Government faced the problem, with such a long quarantine, a policy that in perspective is seen as wrong, ”he emphasizes. Soledad Pérez Duhalde, Abeceb’s Director of Operations, also takes stock of the last year.
“We measure the economic results in GDP and inflation, and the social ones in unemployment and poverty. Any number you look at is going to be in red. When comparing with the region it is seen that we do not stand out for health, since we are in the top ten of the worst, and the same thing happens economically.
In other words, we do not achieve one goal or the other. Could something better have been done? Some neighbors did succeed”, says the economist.
To have a reference, you can review the performance of the rest of the region in the period from March to December 2020: according to data from Libertad y Progreso, Brazil’s GDP fell 4.92%; that of Chile, 7.51%; that of Mexico, 9.47%; that of Paraguay, 1.85%. Only Peru overcame the fall of Argentina, having a 13.7% collapse.
For Giarrizzo, Argentina was one of the countries where the pandemic had the greatest economic impact and that happened, first, because almost in no country were there such long restrictions until the activity normalized; and, on the other hand, because it was already in recession.
“Then, the crisis found the market with low levels of sales, with low production orders, families with tight incomes, companies with financial difficulties and problems to cover costs. To that we add that in the midst of the pandemic we were renegotiating the debt and juggling to contain inflation. Few countries had our macroeconomic problems at the beginning of the pandemic and few, in addition, added such a long quarantine,” he emphasizes.
Of all the cocktail of macroeconomic weaknesses that the country suffers, perhaps the most serious of all (or at least the one that is most directly felt in the pocket of the citizen) is inflation. This problem, which was already there before Covid-19, could not be solved: it ended up being 36.1% (in the world it evolved below 2% on average), but with the hidden fact that there were many controlled prices.
“The government can say that it was less than the 53% left by [Mauricio] Macri, but with a tremendous recession and with prices depressed,” emphasizes Tiscornia.
So far this year it was 4% in January and 3.6% in February. The Government calculated 29% in the budget for all of 2021, but the private ones place it above 40%.
The other serious issue observed after 12 months of the pandemic (strictly, one year after the first quarantine announcement) is that, according to the latest available data, three million jobs were lost due to the pandemic. If these people had been counted as unemployed, unemployment would have reached 27%. This brought poverty to a figure above 40%, the worst in the last 15 years.
In all this, the analysts consulted agree, there are many things that have to do with the management of the economic issue, regardless of the pandemic: the fiscal deficit increased, as in many countries, but the fall in GDP and the destruction of jobs in work were more worrisome here.
In addition, reserves were lost and there were problems in the foreign exchange market (exchange rate gaps with respect to the prepandemic widened). This situation eased towards the end of the year, but with controls that will have long-term effects. Federico Vacalebre, an economist at Ucema, emphasizes that the country suffered the consequences of coming with a strong recession since 2018 and of facing the pandemic with extreme measures, which cut off activity and began to impact from March.
“Something that shows very clearly what these measures did was what happened in April, when the worst drop in the level of activity in the history of the country was seen (26.4%; at the exit from convertibility, in May 2002, the fall was 16%) ”, he summarizes.
And there was also a very significant drop in investment, due to the perception of instability and the lack of clear rules. “The pandemic showed the Government making decisions that made it lose credibility and they ruined very strongly with the expectation that Alberto Fernández would be able to moderate Cristina and that he would not return to extreme measures of the previous Kirchnerism. That is to say, that to the economic part, it would add a political deterioration triggered by Covid-19, ”says Tiscornia.
Another negative effect of the pandemic is that the Government took advantage of the emergency situation to delay structural reforms and to advance on issues that generated controversy: greater state control, attack on Justice and the media, and attempted intervention in companies, to name a few.
Is that, due to its long-standing structural problems, when the coronavirus broke out, Argentina had in its “palette” of options much fewer alternatives than the rest. Cachanosky illustrates this very clearly: “In this pandemic there were three types of countries: developed countries, which can cope with the crisis with super-packages; emerging markets, which emit a little, but can also turn to international markets and take on cheap debt; And finally, there is Argentina, which is an emerging market that cannot resort to the markets to borrow, so it only has to issue.
The country was able to spend 2020 with issuance, but this year no longer, because it is going to begin to suffer the inflation that generated last year’s issuance “, highlights the economist.
Vacalebre claims that 2020 was the final curtain for a decade without growth. “The deficit has been financed so far with issuance, which leaves the economy with a significant monetary surplus that has to be sterilized.
The sounding board for these imbalances is the foreign exchange market, with a gap that does not fall below 60% [and that exceeded 130%]. It is a short-term problem, which has already become a structural one, which should be corrected in 2021 ”, the specialist analyzes.
The worst hit sectors
By putting the magnifying glass on the sectors, the photo was quite similar to that of other countries: those linked to tourism (travel, restaurants, hotels) were severely punished. So were shopping centers and construction, two items that only recovered somewhat at the end of the year.
On the side of the least hit are financial intermediation (banks), food and beverages, and energy. A separate mention deserves electronic commerce, which, although it crosses several areas, had a growth in its turnover of 124% during the pandemic, according to data from the Argentine Chamber of Electronic Commerce (CACE). “It was part of a change in habits that is here to stay,” says Vacalebre.
If you look at it from the point of view of companies, the major victims of the pandemic were SMEs. According to the Argentine Chamber of Medium Enterprises (CAME), last year 90,700 stores closed, 41,200 SMEs and 185,300 workers were affected.
The items with the most closures were clothing, footwear and decoration and home textiles. “The massive closure of premises was one of the serious consequences that the quarantine left on SMEs. The first numbers reflect this impact: 15.6% of the country’s commercial premises closed, without any record of having moved to cheaper areas ”, the work concludes.
For Vacalebre there is clearly a heterogeneity between the different sectors of the economy that should be noted, since in some cases the year-on-year decline in the first quarter was up to 15%, while in others figures that had never been seen before were recorded.
“For example, sectors such as financial intermediation, public services and commerce in June did not have any type of variation and showed positive figures the following month. Now, on the sidewalk in front, the most affected were hotels, gastronomy and construction, with contractions of over 40% and without signs of recovery almost until the end of 2020, ”he says.
The worst thing about this scenario is that, as the expert points out, the prominent falls in the worst hit sectors had quite lasting consequences on the economic structure, since, although the reopening allowed a certain rebound, the mere fact of releasing restrictions and resuming the activity avoids damage, the closure of companies or the loss of jobs.
One year after that Alberto Fernández conference in which he announced the beginning of the mandatory quarantine, the Argentine economy appears naked.
The pandemic has to do with it, of course, but also the own weaknesses and the decisions that were made when the storm had already unleashed.