Argentina, whose economy is collapsing, enters presidential elections this Sunday. GDP has not grown in the last three months. Year-on-year inflation exceeded 142%. One in four Argentines live in poverty, and two minimum wages are not enough to cover the basic basket of a family of four. In the exchange market, there are a dozen quotes for the dollar. The central bank’s total reserves have halved in the past.
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Argentina, whose economy is collapsing, enters presidential elections this Sunday. GDP has not grown in the last three months. Year-on-year inflation exceeded 142%. One in four Argentines live in poverty, and two minimum wages are not enough to cover the basic basket of a family of four. In the exchange market, there are a dozen quotes for the dollar. The central bank’s total reserves have halved over the past four years and net reserves are in the red. The government, in addition, has to repay a $44,000 million loan to the International Monetary Fund (IMF). Argentinians hope that whoever comes to Casa Rosada will end the suffering. The options are two and different: an economist promising a brutal shock and the current economy minister.
The Peronist candidate, Sergio Massa, has been in charge of economic administration for the past year, and many wonder what he would do differently if he became president. His coalition blames the deepening crisis on a historic drought that cost $20 billion, the impact of the pandemic and a loan taken out by Mauricio Macri’s government with the IMF. On the other hand, the radical liberal Javier Milei blames the crisis on the “corruption” of the monetary issue and proposes to dollarize the economy in order to free the economy from inflation and to reduce public spending to a minimum, which economists consider the world to be classified as dangerous. This is an X-ray of Argentina’s stifling indicators.
Gross domestic product
The gross domestic product (GDP) of the second largest South American economy fell by 4.9% in the second quarter of this year compared to the same period of the previous year. This indicator, which measures the behavior of a country’s economy, has had its ups and downs, but Argentina has remained stagnant for years: in the last decade, it grew only in 2013, 2015 and 2017; In the rest, the economy shrank. The first year of outgoing President Alberto Fernández’s government, which coincided with the start of the pandemic, saw a drop in GDP of 9.9%. The following year, the indicator rose again and the trend continued. According to the IMF report, per capita GDP will be $22,000 in 2022, 9% lower than a decade ago.
The Consumer Price Index tells Argentines about monthly inflation or how much purchasing power has been lost. According to the latest official data, the rate increased by 8.3% in October compared to September, reaching a record 142.7% year-on-year in the last 30 years. Argentina, which has one of the highest inflation rates in the region, ranks second worst after Venezuela. In 2015, when conservative Mauricio Macri took office, inflation was 25%. By the time he left the Casa Rosada, four years later, it had doubled to 54%. Today, the rate of inflation has almost tripled and, according to private projections, will accumulate a 185% increase this year.
According to the National Institute of Statistics and Census (INDEC), four out of every ten Argentines are poor. Poverty increased by five points during the government of Mauricio Macri (2015-2019) and almost five points during the government of Alberto Fernández, who will hand over office on December 10. Data for the second half of 2023 is the highest since early 2021, a year after the pandemic. The ratio worsens among young people: 56% of under-15s are poor. Also, 9.3% of Argentines do not have enough income to buy food. The minimum wage was 146,000 pesos in November, double the amount barely enough to pay for the basic basket (food, transportation, clothing, etc.) of a family of two adults and two minors.
The unemployment rate is one of the few indicators of improvement, though it comes in an increasingly precarious labor market, with wages falling due to inflation. When President Fernández took office, 8.9% of Argentines were unemployed and looking for work. In the second quarter of this year, according to INDEC, the percentage dropped to 6.2%, and mainly affected young people between the ages of 14 and 29: the rate for that age group was 13.4% in the case of women and 12.3% in men. . Unlike in previous quarters, the drop in unemployment was driven by a drop in the number of people looking for work in the past three months, not an increase in employment, which remained steady.
Evolution of the Argentine peso against the dollar
The peso’s peg with the US dollar ended in Argentina after the crisis Sports hall, in 2002. Until then, the Currency Act established a fixed balance between the two currencies. Argentina today has a dozen exchange rates since exchange controls were tightened in 2011. At that time, one official dollar was equal to 4.3 pesos, and the equivalent dollar, called the dollar. Blue (one traded in the illegal market), A 4,6.
At the end of 2019, when Fernandez arrived at the Casa Rosada, the rate was 62 pesos to the dollar. After being frozen at 365 for three months, it has risen to 369 pesos per dollar. The exchange gap exceeded 160%: one dollar Blue It sells for 950 pesos on the street.
Central Bank’s International Reserves
The government attempted to maintain the peso’s value through interventions in the exchange market at the expense of draining the central bank’s deficit reserves. Argentina’s monetary authority reports that total reserves fell 53% to $20.9 billion in the past year. However, private consultants’ calculations analyze the net reserves, i.e. the money in banknotes freely available to the central bank. These numbers, not recognized by the central bank, show figures in the red: analysts estimate that the central bank had $12,000 million in its coffers when Fernández arrived at the Casa Rosada; After four years, they estimate the position is more than $10 billion in the negative. The country has a chronic shortage of foreign currency, but in 2023 a historic drought affected the agricultural sector, which contributes seven out of every ten dollars entering the country.
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