Sunday, December 10, 2023

Argentina, the worst performing economy in Latin America

The economies of almost all of Latin America are on the road to recovery. The IMF, at the beginning of the summer, and the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), in September, improved their growth forecasts for the region, with Panama and Paraguay leading, but driven above all. in the two largest economies in Latin America, Mexico and Brazil. These two countries have been able to follow the rise of the United States and China, their main economic partners, respectively.

At the other end of this panorama of moderate optimism is Argentina, whose economy is expected to contract by up to 3 percent this year. It is one of only two countries on the continent – along with Chile, which is forecast to see a slight drop of 0.3 percent – that will not grow this year. The drought that hit the country this year, which is highly dependent on agricultural exports, is undoubtedly one of the reasons. But not the only one.

The economy is one of the main issues in the election campaign there. This Sunday, October 1, the manifesto candidate Javier Milei, in a more moderate tone than usual, presented himself in the first debate before the elections on October 22 as the only one “in a position to end the inflation and uncertainty”. Its formula: deregulation and privatization; where, he assured, in 20 years Argentina will reach the standard of living of Germany.

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Uncontrolled inflation in a “fragile scenario”

A recent study by the University of Buenos Aires (UBA) highlighted that, “for the first time in thirty years, the main items of the consumer price index (CPI) increased more than 100 percent annually .” Matías De Luca, from the RA Center of the Faculty of Economics of this University, highlights, along with the “peak of inflation”, other aspects of the “fragile financial scenario” in Argentina: “The Central Bank has run out of reserves (actually they are negative)the agricultural sector has gone through one of the most aggressive droughts in recent decades (which cost us 20,000 million dollars in exports) and, in between, the presidential elections that flooded the situation which is uncertain, especially because of how opposite the economic plans are. according to the candidate.”

From the RA Center (for Studies for Argentine Recovery), De Luca regrets the running public spending and that “without the political consensus, they try to ‘fix’ things with patches. ” For him, inflation is a consequence of this: with such high spending, any attempt to adjust will have effects on the whole economy. In addition, it was not possible to take advantage of the favorable situation in the rise of raw materials last year due to the war in Ukraine. “Instead of buying dollars because of the improvement in terms of trade, (the Government) interprets this surplus as a margin to delay the exchange,” complained the Argentine economist.

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Twenty years is nothing

The next electoral debate in Argentina will be held next Sunday, precisely in the UBA, even in the Faculty of Law. De Luca is clear on what he would recommend to the candidates on economic matters, if he met them: “I think it is important to achieve a high level of political harmony so that all the changes or that Argentina should do can be sustained over time.” Milei asked for twenty years, as Gardel nodded, too long for any experiment.

‘Stable’ countries are those that continue to grow“, De Luca explains: “In other words, they show moderate but steady progress, and that, in the long term, is the reason for the difference… Argentina, on the other hand, is a more volatile economy.”

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Share the wealth or share the scarcity?

The vice president of the World Bank, Colombian Carlos Felipe Jaramillo, recently highlighted the “admirable macroeconomic management of most Latin American countries.” And he is “optimistic” about Argentina because the drop in its GDP is “temporary”, because of bad harvests, and because it has key natural resources such as lithium, but also unconventional reserves which are hydrocarbons. But Jaramillo also stressed that the region needs a higher growth rate “to really overcome the problems of poverty and inequality.”

If we stick to these two aspects, without a doubt, Uruguay is the leading country in the continent. However, Argentina, after all, is better located than, for example, Mexico or Colombia. And its economic policies, with all their faults, stand out in their emphasis on equality, with the Gini index, which measures the distribution of wealth, second only to Venezuela. But of course, it is about creating more wealth as it is about distributing it better. And Argentina still has a lot to improve on first.

Nation World News Desk
Nation World News Desk
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