in Argentina, blow for a dying economy

Argentine President Alberto Fernandez, in Buenos Aires, March 19, 2020.
Argentine President Alberto Fernandez, in Buenos Aires, March 19, 2020. JUAN MABROMATA / AFP

From this Friday until March 31, the vast majority of the 44 million Argentines will have to be confined to their homes and travel reduced to the bare minimum. "If the contagion decreases, we will suffer much less as a society", insisted President Alberto Fernández, in a televised statement Thursday, March 19.

This quarantine, expected but feared, risks sounding the death knell for the country's economic recovery, after almost two years of crisis, which started during the presidency of the liberal Mauricio Macri (2015-2019). Since mid-2018, the poverty rate and unemployment have exploded, inflation has risen sharply (54% in 2019) and the purchasing power of Argentines has collapsed.

Brake on

Coming to power on December 10, 2019, Alberto Fernández promised to end the austerity policies of his predecessor, who notably contracted a loan of $ 57 billion with the International Monetary Fund (IMF) '' finally received only 44 billion, Mr. Fernandez did not wish to receive the last payments). "There is no debt repayment that is sustainable without growth", hammered, a few weeks ago, the center-left president.

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But that was without counting the acceleration of the coronavirus epidemic on Argentine soil. With 128 confirmed Covid-19 cases, including three fatal, as of March 19, Argentina is still relatively unaffected by the virus compared to other countries in the region such as Chile, which already has 342 cases. But strong measures, including quarantine, taken by the government to stem the epidemic will inevitably put a brake on the policy of revival desired by Mr. Fernández.

The government’s plan is to freeze the prices of certain essentials and provide bonuses to the most vulnerable sectors.

The government has entered into negotiations with the IMF and Argentina’s private creditors to restructure part of the country's debt. But the expected deterioration of the economic situation – on which the Minister of the economy Martin Guzman must give details this Friday March 20 – as well as the sharp increase in "Country risk" (the rating agency index that measures a state’s ability to honor its obligations) means that Argentina "Certainly lost room for maneuver in these discussions", says Matías Rajnerman, chief economist of the Ecolatina consultancy. The latter expects a contraction of 2% of Argentine GDP in 2020. Mr. Rajnerman judges "Impossible for negotiations with Argentina's creditors to be concluded before the end of the first half of 2020 (the government set a target on March 31) ".


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