13.05.2021

Argentina: Not Only Football Issues

Argentina flew from the 2018 World Cup in the 1/8 finals and can now fully concentrate on economic issues, which are much more serious than the national team’s departure from the world Cup.

Despite the endless talk of financial assistance from the International Monetary Fund and the reforms that this money will allow, the national currency of Argentina continues to plummet. Peso has once again updated the historic low, despite all attempts by the central bank to stop the collapse.

Zerohedge

At the end of last week, the financial regulator decided to once again intervene and bought the peso for about $ 1 billion, but this only partially affected the movement of the currency, and by the end of the day it still fell by about 3%.

Below is a graph where important events are noted, which, however, could not change the devaluation trajectory in the country’s foreign exchange market. We also note that the billions of interventions carried out in June were also unsuccessful.

Zerohedge

We did not just celebrate the departure of the Argentina team from the World Cup. The largest football tournament for a while made me forget about the problems and concentrate on the team’s game (the Argentines cheer for the team with all their heart). However, now the economic downturn has also been aggravated by an emotional decline after the failure of the players.

The IMF expects the economy to contract in the third and fourth quarters of this year, but it is believed that the reforms and behavior of private investors will allow it to grow by 1.5% in the first quarter of 2019.

IMF agrees to give Argentina $ 50 billion loan

The IMF and Argentina have concluded an agreement to help her, which should help stop the depreciation of the peso and financially support the government of President Mauricio Macri. It, in turn, promised to accelerate the implementation of plans to reduce the budget deficit. The fund will open a credit line for $ 50 billion to Argentina, this amount corresponds to the maximum estimates given by analysts who spoke about $ 30-50 billion, Vedomosti writes.

Macri turned to the IMF about a month ago. The fall of the peso, whose rate has fallen by more than 25% since the beginning of the year, threatened Argentina’s ability to service its debts, most of which are denominated in dollars. Argentina returned to the international capital market only a few years ago after it finally settled disputes with investment funds seeking repayments after a massive default of the country in 2001.

Argentina has high inflation, budget deficits and current accounts, and such a combination of factors is always detrimental to national currencies.

Leave a Reply

Your email address will not be published. Required fields are marked *