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Thursday, March 5, 2015
- Argentina has better prospects in 2013 after modest growth in 2012, thanks to an excellent grain harvest and the recovery of Brazil, its main market.
But high inflation remains an unsolved challenge.
Since the government took control of the National Statistics and Census Institute (INDEC) in 2007, its inflation figures have been called into question, locally and internationally. INDEC reported inflation last year as 10.8 percent, but estimates from the private sector and the parliamentary opposition put it at 25.6 percent.
“There was a sharp economic slowdown in 2012, partly because of the international crisis and partly because of internal imbalances,” economist Luciana Díaz, director of the fiscal policy programme at the Centre for the Implementation of Public Policies Promoting Equity and Growth (CIPPEC), an NGO, told IPS.
CIPPEC carries out constant monitoring of the public policies of the centre-left government of President Cristina Fernández.
According to INDEC’s latest figures, GDP grew 1.8 percent in the first three quarters of 2012, a poor result compared to GDP growth of 8.9 percent for the whole of 2011.
“The fiscal situation is being patched up with band-aids instead of developing comprehensive solutions. This affects monetary policy, increases inflation, blocks imports and creates expectations of a devaluation, which has repercussions on the level of economic activity,” Díaz said.
This expectation is reflected at present in a widening gap between the official value of the dollar (not available for savings) at 4.99 pesos, and the black market dollar (or “blue rate” as it is termed locally), which in the first few days of February was valued at between 7.60 and 8.00 pesos.
Díaz said this scenario is a disincentive to private investment. The government is trying to compensate with greater public investment, “but then the vicious circle is intensified,” she said.
In Díaz’s view, if adjustments had been made two years ago to limit public spending and inflation, growth would have been lower in 2010 and 2011, but higher in 2012. “We would have avoided these fluctuations that create uncertainty,” she said.
The government is forecasting a recovery in 2013, with GDP growth of 4.4 percent, according to this year’s budget. Payments due on external debt will also be lower this year than in 2012.
Private analysts concur with the forecast of higher economic activity, which is attributed mainly to recovery in Brazil, which had 1.2 percent GDP growth in 2012 and this year is predicted to have four percent.
Data on Brazil are provided by the Preliminary Overview of the Economies of Latin America and the Caribbean 2012, released in December by the Economic Commission for Latin American and the Caribbean (ECLAC).
The ECLAC overview reports growth of 2.2 percent of GDP for 2012 in the Argentine economy, and 3.9 percent in 2013, because of Brazil’s greater dynamism and a bumper grain harvest, a key element in Argentina’s economy.
Automobile production and sales in 2012 compared with projections for 2013 show the extent to which Argentina depends on Brazil’s prospects. Eighty-two percent of Argentine car exports are sold to Brazil.
According to the Asociación de Fábricas de Automotores (ADEFA), the industry association, in 2012 production fell by 7.8 percent compared to 2011, while exports fell by 18.4 percent.
If Brazil experiences a recovery, as it already has in the last quarter of 2012, production volumes of Argentine cars will increase, as well as sales, ADEFA said.
The grain harvest this year is forecast to be larger than last season’s. “It may even be one of the best harvests we have ever had,” Gustavo López, an analyst with Agritrend, a consultancy, told IPS.
López said the sum of the expected harvests of soybean and maize – the main export crops – together with the completed harvests of wheat, barley, sorghum and sunflower, will reach a total of between 105 and 110 million tonnes.
“The best season so far was in 2010/2011, when the harvest was 103 million tonnes,” he said. However, he preferred to err on the side of caution, especially as much depends on the level of rainfall in the next few weeks.
The 2011/2012 agricultural cycle produced a harvest of only 90 million tonnes, due to drought which reduced crop yields. This year, in spite of a lower cultivated area, volumes are expected to be higher, López said.
On its own, soybean, the star crop, accounts for half of the total harvest.
“If the forecasts are fulfilled, some 80 million tonnes will be exported, representing earnings of 36 billion dollars, out of which 10 billion dollars will go into the state coffers because of (the tax known as) ‘export retentions’,” López said.
With these improved prospects, the issue on the government’s economic agenda that is the greatest irritant at the start of this year is inflation, a variable for which official figures are nearly 15 percentage points lower than those of the private sector and those presented in Congress by the opposition.
On Feb. 1 the International Monetary Fund (IMF) took the unprecedented step of issuing a “declaration of censure” against Argentina because the measures taken to correct its economic statistics “have not been sufficient.”
The IMF gave the country until Sep. 29 to address the inaccuracies in its consumer price index and GDP growth figures.
The government responded through the economy ministry, blaming the IMF for allegedly contributing to the 2001-2002 Argentine banking crisis and attributing the motion of censure to the IMF’s hostility to Argentina’s determination to reduce its external debt.
However, the government did say it was working on a new price index which will come into force in the last quarter of the year.
ECLAC’s overview said the official inflation rate of 10.8 percent was the second highest in the region after Venezuela. If the opposition’s figure is adopted, Argentina’s inflation is the highest in Latin America.
In spite of its reluctance to openly admit the difference between official and unofficial inflation rates, the government is approving wage and pension increases that are closer to the unofficial consumer price index than to the government’s own.
Meanwhile, the domestic trade secretariat is temporarily freezing prices in supermarket chains and also on household appliances. But according to Díaz, “price controls are increasingly ineffective.”