Highlighting Argentina’s progress in New York, but warning about the deficit
The discussion of the seminar organized by the Emerging Markets Traders Association in New York turned on the country’s macroeconomic situation. Analysts highlighted the management by Fábrega and the government’s policy on the international front. However, they put into question the fiscal deficit, energy subsidies and inflation. The lawsuit with the vulture funds in New York was in a secondary place. The most optimistic analyses were that the Supreme Court could hear the Argentine case.
Monday, March 3, 2014
By Maria Elena Candia
"There was a very strong consensus that Argentina is not Ukraine nor Venezuela and that is economic situation is far from being like it is in those countries,” said Walter Molano, chief economist at BCP Securities, reviewing the climate that the seminar had about Argentina, organized by the Emerging Markets Traders Association (EMTA) on Friday in New York, which the economist moderated.
The meeting, which was sponsored by Puente, brought together investors and analysts to discuss the current and future state of the Argentine economy. There was a kind of consensus among panelists in recognizing the measures that the government is taking on the international front – like the agreement it signed with Repsol – together with the leadership of the Central Bank under the control of Fábrega. But they also remarked that the government will have to resolve the fiscal deficit for attacking inflation.
In addition to Molano, the seminar included Arturo Porzecanski, professor at The American University, Casey Reckman, analyst from Credit Suisse, Vladimir Werning, director from JP Morgan and economist Guillermo Nielsen.
For Molano, Argentina has imbalances that at some point will have to be addressed. “The problem that was mentioned as being central was around energy subsidies, which feed the fiscal deficit and the monetization of the economy, which pushes up inflation and the distortions in the exchange rate. The solution is out there,” Molano explained in an interview with El Cronista, highlighting that the macroeconomic issues were the center of the discussions in an auditorium that had perfect attendance.
"We see some steps in the right direction, like the commitment with the international agenda and a more active management of monetary policy. However, our main concern is that, in the absence of a strategy to fight against inflation that includes a significant fiscal adjustment, we could see greater pressure on the peso at the end of this year. Otherwise, the government will not be occupying itself with the key underlying questions,” warned Casey Reckman, analyst for Credit Suisse, in statements to this newspaper.
In relation to how they panelists see the country’s near future, Arturo Porzecanski admitted to have painted the darkest scenario. “When people return from their carnival vacations they will find higher prices, which will influence collective bargaining, by which the atmosphere will be very hot. Contrary to what happened in previous years, when companies could earn well and compensate workers for inflation and the government could also count on sufficient resources to give increases, now tax revenue isn’t enough. This makes it clear that nobody could aspire to a 35% salary increase to compensate for inflation,” Porzecanski explained to El Cronista.
While the increase in interest rates helped stabilize the currency exchange market, this is a factor that eliminates credit power and the margins of investment. “This will affect the level of activity. It remains to be seen how severe the recession will be this year,” Porzecanski said.
The lawsuit Argentina maintains with the holdouts in the U.S. Supreme Court, which is always on the agenda of questions about Argentina, was also part of the discussion, while in second place. According to Vladimir Werning, the Court will accept the Argentine case and also will ask for the opinion of the American government. He said that other governments in addition to France will support the country’s position, which will convince the highest court that a problem of international scope is being put forth.