Economists, analysts and the financial press that provides their viewpoints have been spending early May 2018 pointing to red flags they see emerging within Argentina’s economy.
Forbes contributor Kenneth Rapoza has an online piece with the provocative title “It might be time to get out of Argentina.” In the article, Rapoza quotes a Costa Rican investment advisor and a New York-based analyst with concerns about the country’s future.
“The [Argentinian president Mauricio] Macri administration needs to reaffirm [its] commitment to orthodox policy management and fiscal adjustment,” Siobhan Morden, a New York-based Latin America analyst for Nomura Securities is quoted as saying.
She continues, “The economic team will have to ignore the weaker confidence indices and resist any near-term political pressures of the opposition to delay tariff hikes. Argentina is vulnerable. It’ll be really important to manage market confidence with no room for any mistakes.”
The Costa Rican advisor, Fernando Pertini, chief financial advisor with Millenia Asset Management, says previous moves by the Macri administration provided temporary boosts to the economy but any advantages created may have run their course.
“I have seen all of this play out before: the government is using the central bank reserves to artificially inflate the peso and we have pesky high inflation,” Forbes quotes him as saying. “Argentina’s economic team looks lost,” he adds.
The article’s author Rapoza points out that the Argentine peso started 2018 trading at 18.40 to the United States dollar, but it was trading at 21 to the dollar on Thursday, May 3.
A columnist the with the United Kingdom-based periodical The Economist who goes by the pen name Bello points to similar concerns in a column posted online May 3, 2018. The U.K. columnist, however, also cites global economic considerations beyond Macri’s control.
Macri “has done a pretty good job,” writes Bello. “The problem is that stabilizing the economy is taking longer than the government had hoped and investors have become more reluctant to lend to Argentina.”
Also plaguing the effort, according to the pundit, is Macri’s setting of low inflation targets at a time when the U.S. Treasury is raising interest rates, “prompting investors to pull money out of riskier assets,” according to Bello. Thus, the spread on Argentine bonds has risen from 3.4 percent to 4.2 percent in 2018, leading to the Argentine currency’s depreciation.
The Economist author is not completely gloomy, writing that Argentine officials “are confident that inflation will now start to recede,” and that “they are also likely to try to placate investors by slashing non-essential spending [to] lower the primary fiscal deficit.”