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June 29, 2021

The Week at a Glance

Argentina: Of Economic Programs, Jobs, and Exchange Rates

BY Alejandro Giacoia, Andrés Borenstein, Miguel A. Kiguel, Lorena Giorgio, Isaías Marini

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( 2 mins)

Lost in the Jungle

The government has failed to define an economic program. Beyond the multiple dialectical errors of the president and the curious diplomatic alignment that Argentina has been taking, the truth is that while the world is at full speed thinking about the post-pandemic, Argentina seems trapped in a labyrinth that includes short-term decisions with electoral objectives, and visions of the economy that were already old in the last century. As when it is claimed that capitalism did not have good outcomes or fights against the agribusiness sector even signaling that private property seems to be questioned.

The Economy Cools Down: When Does the Recovery Return?

The economy cooled down, there is no doubt about it. In March, activity fell 0.2% monthly without seasonality, despite the market consensus expecting a rise. But with the worsening of the health situation and the imposition of new restrictions, the EMAE numbers for April and May will be worse. Construction has been contracting for three months and the Industry did not recover from the decline in February. Consumer confidence is in decline and restrictions have deepened the drop in consumption. In this context we ask ourselves: when will recovery return?

The External Sector Will Give the Central Bank Space in 2022

So far this year the Central Bank has bought USD 5,880 million reserves in the foreign exchange market. At this point last year, the Central Bank had sold USD 567 million and in the whole year ended up selling USD 4,169 million. Of the total purchased, only half went to increase the international reserves stock, since it sold USD 672 million to the public sector, paid to international organizations (another uses of the public sector) for USD 1,243 million, lost USD 417 million for reserves and USD 644 million in the item other than includes the price movements of the yuan, gold, and the use that the Central Bank makes to intervene in the blue-chip swap market.

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