The news is passing under the radar, but it is no less important for this. Indeed, for the fragile economy of South America it could have the effect of a deflagration. Argentina risks bankruptcy. As in November 14, 2002. Like when the terrible crisis then forced people to loot shopping centers to fill the doorsteps of the house. This time the conditions are a little different. And the responsibility, it must be said, lies at least in part with the Fed.
The responsibility of the Fed
Yes, from the US central bank. Because the Argentine economy is closely linked to the performance of the US dollar. AND the interest rate hike decided by the Fed has resulted, in recent months, to the appreciation of the dollar against other currencies, including the Argentine peso. In fact, the currency of Buenos Aires has lost almost half of its value towards the American currency. A vortex that could get even worse if Jerome Powell’s minutes, which will be reported next week, contain the will to continue with the squeeze.
The debt to the IMF
To this must be added inflation that has exceeded 100 per cent in one year and the suffocating debt incurred with the International Monetary Fund (IMF). In January 2022 the government of President Alberto Fernandez had already obtained a review to try to make the payment of the debt less onerous. But it is, however, a mountain of 45 billion dollars of exposure, underwritten in 2018 by former president Mauricio Macri.
The sudden drought
Last but not least, it was the drought that put the country’s accounts in difficulty. The worst of the last sixty years, according to some estimates. For the agri-food sector, which has always been the engine of the national economy, it was a very hard blow. In March, just to understand, the sector grew by only 0.2 percent on a year and many predict that 2023 will end in a recession.
This is why for Argentina, even a few months before the elections, avoiding the ghost of a new default appears as complicated as solving the Rubik’s cube. And the only one who could really benefit from this voting crisis could be the ultra-liberal candidate Javier Miley, founder of the party “Freedom advances” . “I’ll be a chainsaw,” he promises. In the polls he is constantly on the rise.