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August 19, 2021

The Week at a Glance

Argentina: One Year After the Restructuring, Still Orphans of a Plan

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

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( 2 mins)

A year ago, Argentina reached an agreement with its main creditors and restructured the public debt in default. That allowed to almost clear the maturities schedule completely. The first year in which the market will see Argentine dollars will be in 2025 when between capital and interest it will pay about 10 billion, 2% of GDP. It still sounds like a small amount for a G20 country.

Demolishing Markets

A new communication issued by the Central Bank last Thursday surprised the operators. Officially, the measure aims to “prevent money laundering and tax evasion”, but the reality is that it is a new maneuver to reduce the number of lanes on the dollarization highway, reduce the greenback hoarding that accelerate close to the elections. It has been two years since the day after the primaries of 2019 (Aug 11), in which Argentina entered a dynamic that is, slowly but without hesitate, demolishing the exchange market and, together with it, part of the capital market (and others of the economy as a hole).

Inflation Will Only Fall Marginally in the Remainder of the Year

Headline inflation in July was 3.0%, in line with our expectation, with which in 7 months prices accumulated an increase of 29.1% and 51.8% in the last 12 months, the highest value since January 2020. And the next months will not be far from this number. The data only confirmed what we had been saying several months ago: the 29% goal set in the 2021 Budget was just an expression of desire that would become impossible to meet in the current Argentine macro context. It would take much more than freezing rates, slowing the FX depreciation or implementing regulations to reach 30% per year.

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