Atradius publishes new economic report on Argentina: 100 days and counting

Trade credit insurer Atradius has published a new, economic review of Argentina.

The report, entitled Argentina: clock is ticking 100 days after elections, is a useful information tool for any business trading within the country, providing insight into political and economic developments. Publication marks the 100-day milestone of centre-left Peronist Alberto Fernández’s election victory in October, and the subsequent the formation of a new government.

Report highlights:

  • Recession remains: After falling into recession in 2018, Argentina’s economy is expected to have contracted by a further 2.4% in 2019 and 1.2% in 2020.
  • Financial pressures: Inflation remains stubbornly high at an annual rate of more than 50%, unemployment exceeds 10% and the poverty rate has increased to more than one third of the population.
  • Currency volatility: Political and economic uncertainty has led to significant peso depreciation – by 50% in 2018 and 37% in 2019, forcing currency restrictions and a re-profiling of foreign currency debt.
  • New fiscal measures: The new government has launched several emergency measures to kick-start the economy. A six-month price freeze for utilities, reduction in medicine prices, rise in wages, tax rebates for the most vulnerable, one-time bonuses for minimum pensions and refinancing options for distressed SMEs. In addition, interest rates have been repeatedly, from 63% to 48%, meaning that real rates are now negative.
  • Taxation: New measures to support government finances include a doubling of personal property tax, reinforcement of exchange-rate controls, rise in export duties on agricultural exports and a new 30% tax on individual USD savings and purchases, which is significant for businesses selling into Argentina on US dollars terms.
  • Ambitious debt restructuring: Major debt repayments are due this year and the government has little time to strike a deal ahead of the 31 March deadline for the conclusion of debt talks, creating a high risk of a disorderly debt default.

Tanya Giles, Head of SME business for Atradius UK, said: “The new administration in Argentina faces a tough balancing act between campaign pledges to limit austerity and investor demands for a clear macroeconomic plan to enhance the long-term sustainability of government finances. Reviving the economy and rebuilding confidence is crucial and failure could lead to further peso depreciation, higher inflation and a further tightening of currency controls, making it impossible for the government to finance its social programmes and restart the economy. Economic hardship for Argentina’s population is it seems not over yet. For firms trading in Argentina, it is as important as ever to be alert to the political and economic landscape and the impact of the administration’s actions upon the market, upon local businesses and on consumers. In a market defined by such uncertainty, comprehensive knowledge and expert, real-time insight can make the difference between payment delays and developing a profitable, successful trade relationship”