The Challenges of Macroeconomic Stability in Argentina: What Comes Next?
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Heading into next year’s elections, President Mauricio Macri faces bleak economic prospects. The Argentine peso has lost half its value this year and the country’s inflation rate is among the highest in the world. The economy is expected to contract this year by 2.5 percent.
In a symbol of the hard slog ahead, the International Monetary Fund is opening a permanent office in Buenos Aires, where its economists will supervise its largest-ever loan. The $57-billion IMF bailout has stabilized Argentina’s crisis-prone economy, helping to prevent a meltdown that would have added to global emerging market jitters. But it came at a tremendous political cost – the IMF is a deeply mistrusted institution in Argentina, and its loan conditions are deepening the economic contraction.
This event considered Argentina’s macroeconomic challenges, the international response, and the country’s uncertain path to recovery.
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"Argentina’s going to host the G-20 leaders meeting in a few weeks, at the end of this month, and that’s a very important signal that it’s coming back into the fold of the large economies of the world.”
“If you really want to create value in your currency, your currency needs to pay you. If you’re saving your currency and your currency is going to pay you below inflation, then guess what – you’re going to use another currency.”
“Domestic activity in Argentina is going to suffer a lot, and a lot comes from the monetary rule that was put in place temporarily in order to provide some sort of anchor for the currency.”
“We should expect a baseline scenario in which the country muddles through and policy continuity is guaranteed through Macri’s term and beyond. There are risks in terms of their ability to implement, number one, domestically, and what would happen if we got an external shock of the size we got already in 2018.”
“The key source of instability in Argentina is, in my view, the currency composition of sovereign debt, and how any external shock that we get is massively amplified by the fact that we have so much debt in U.S. dollars.”
“If Brazil is successful in reforming its economy and opening up its economy, I wonder if that might also put pressure on Argentina to do the same to maintain competitiveness, or [if it] might help reinforce any kind of reform momentum in Argentina.”
“It’s interesting to look at what’s going on with the traditional Peronist coalition and whether a real solid coalition will be built there or not. I think a lot of the figures in that group represent fairly diverse views."
The Argentina Project is the premier institution for policy-relevant research on politics and economics in Argentina. Read more
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