Editorial: The Same Mistake Time After Time
Argentina continues to stumble over the same stone. It is often said that no single instrument can be used to solve many problems. But sometimes just one policy error creates a lot of problems. The announcement of a 30-day beef export ban seems to go in that direction. If the aim is to lower inflation, it is very difficult to achieve it and if it does, it will be exclusively in the short term. It is true that beef price rose considerably more than inflation. The price of the steer in Liniers grew 101% in the last year. Minced beef in Greater Buenos Aires rose 63.85%, 17 points more than retail inflation. But what these types of measures do is reduce the supply in the medium term and therefore raise prices, with the secondary effect of reducing the export as well. The last time something similar was implemented, Argentina lost 10 million of heads, cattle went from 57 to 47 million. Even a moderate increase in the export tax rate would have been better than prohibiting.
Is The Budget Lost?
An hour after the president's announcement about the imposing of new mobility restrictions for the next weeks, the fiscal result of April was released, showing a primary deficit of ARS 11,445 million. In the accumulated of the first four months of the year the deficit was up to ARS 80,594 million, the lowest in the last 5 years. The coincidence is striking: the good fiscal result just released contrasted with the announcements of higher expenditures due to the tightening of the restrictions.
Activity and Foreign Trade: Bad News and, Good News?
Two important economic results were released last week: the trade balance for April and the economic activity for March. On the one hand, the trade balance showed a surplus of 1,470 million dollars, the best result since July 2020. On the other hand, economic activity surprised with a decrease of 0.2% compared to February, when it had contracted 0.9%. The releases seemed to provide some good and bad news. But what appears to be positive on the commercial side does not turn out so well in light of the evidence.
What Is Going on in Latin America?
In recent weeks, problems have emerged in three of the economies that have best managed macroeconomic policy in the region for at least two decades. Chile, Peru and Colombia. Although in all three cases problems had appeared before, in Chile’s case with the protests in October 2019, or in Peru with multiple ex-presidents impeached, imprisoned or having committed suicide, the point is that politics in those countries is in a state of upheaval. The question is what will happen going forward. The answers are probably not the same for all countries. But for some time now, traditional parties have had a hard time winning, faced against multiplying “outsiders” (Bolsonaro was the first in the region perhaps). And the pandemic further aggravated the situation. Latin America has suffered the worst by far, perhaps with the exception of Italy and Spain in the first months after the virus appeared.
Econviews Weekly May 26th 2021