Argentina

Geraldinne Ramos
Juan José Garzón

The preliminary balance of the Economic Commission for Latin America and the Caribbean
highlights a not very encouraging outlook for Argentina, since it is evident how its economy
has contracted in recent years, which have had repercussions not only in an increase in
inflation, but also a severe depreciation of the peso, interest rates and a fall in real family
income, together with the contractionary fiscal policy implemented under the financing
agreement with the International Monetary Fund, with the great aggravation that both public
and private consumption would decrease, which would end in an inevitable fall in GDP by
1.3%, according to this report things would begin to change into 2020, which would bring a
brief rebound in the economy motivated by increased wages, spending on social protection
and the always decisive increase in public and private consumption, what this report like the
rest of the world failed to predict in a certain way was the arrival of e a virus that would not
only affect human health, but life itself and whose economic consequences have already left
millions of effects.

The Argentine reality goes through a contractionary fiscal policy that is to say: (the interest
rate is reduced, the income and the aggregate demand curve shifts to the left, in the same way
it favors the reduction of spending and the increase of tax collection ), all this has made the
situation not easy at all, which is why the news regarding the real fall in total income, rising
inflation, the fall in private spending and the increase in the stock of public debt is not
surprising.

The bad moment achieved a suspension of a credit installment from the International
Monetary Fund in 2018, which forced the country to go to congress in order to reschedule the
payment of its debts and agree to new terms since the payment was unsustainable in the
already agreed expiration dates, according to the graphs it is evident that one of the main
motivators of this problem is inflation, not only due to the decrease in the real value of the
currency but the problem here is that, it is not known how long it will remain high inflation or
how much more it will rise, which gives a factor of unpredictability and economic instability.
Although the efforts have been directed towards stabilizing the exchange rate adjusted to the
IMF parameters, they have not been able to stop the fall in international reserves, and even
so, the government, in its quest for stability, implemented capital controls whose purpose was
to stop the exit. of financial capital and accelerate the liquidation of exports, among the
measures adopted are limits on the purchase of foreign currency. By implementing this
contractionary policy model, an attempt was made to stabilize the exchange rate, the interest
rate, for which a modification of the monetary aggregates was necessary in order not to fall
into an excessive contraction.

Not everything is negative since there is a part that generates tranquility and it corresponds to
a surplus of 2% in relation to GDP, a lower deficit of services equivalent to 1.4% of GDP, all
this as a consequence of a year-on-year decrease in imports in the first half of 2019, along
with a 2.4% growth in more exports (commodities), highlighting in the same way that the
growth of raw materials is also due to the fact that in the previous year (2018) the crops were
seriously affected Affected by periods of drought, which provided a low base for the
comparison with 2019, this first quarter was also leveraged by the Standby credit line and the
expansion of the foreign exchange swap with China.

This was not enough to prevent economic activity from contracting by 2.5%, since the fall in
private consumption, public consumption, investment and trade in a context where inflation
reached 53.7% and unemployment reached the double digits (10.6%), the panorama becomes
complex not only due to the macroeconomic data that reflect how the economy contracted,
but also because of the number of human beings that will be affected by this phenomenon.