In Argentina, annual inflation is above 50%. This is eroding the real value of some social spending
In 2020 Argentina’s government defaulted on its debt once again, leaving a $57bn loan provided by thein 2018 in a state of limbo. The government is now negotiating with the fund, seeking an agreement which would revive the loan arrangement and delay repayments.totalling about $40bn or risk becoming a financial pariah . That is money the country does not have. And the backdrop to the negotiations is forbidding. The peso on the parallel exchange market is now worth half the official rate.
Mr Macri’s government pursued some reforms. But structural problems continued to impede growth. And the government’s gradual approach to fiscal consolidation meant that Argentina relied heavily on capital markets to fund a budget deficit which ran at over 5% ofthrough his first three years in office.
Although the current negotiations are important, Argentina’s economic ills pre-date the loan in 2018. Populist politicians have long meddled in the markets. After the price of meat rose last year with inflation, beef exports were banned. When the ruling coalition lost a primary election in September, the government slapped price controls on more than 1,400 products, from shaving cream to cat food. Its budgets are distorted by sops to special interests.
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