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Argentina’s economy is looking for stability ahead of Sunday’s elections. For now, however, the country is in a debt crisis.
“There are many factors that contribute to Argentina’s severe economic crisis,” says economist Leandro Mora Alfonsin in a café in the Argentine capital Buenos Aires. There is a lack of money in the Argentine state treasury and the country is heavily in debt.
“Anarcho-Capitalist” Milea in Pole-Position
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Captions: Reuters/Augustin Marcarian
Crisis-hit Argentina will elect a new head of state on Sunday. In the internal primaries in August, the self-proclaimed “anarcho-capitalist” Javier Milei received the most votes, followed by the conservative former Interior Minister Patricia Bullrich and the Economics Minister Sergio Massa from the left-wing government camp. Milei wants to abolish the central bank and make the dollar the national currency. In a country that has been mired in a seemingly hopeless vortex of inflation and economic decline for decades, he is getting there. (agencies)
There has been an exchange rate and debt crisis since 2018. Leandro Mora Alfonsin gives an insight into the horrendous amounts of debt: “In 2018, we took out $180 billion in debt from foreign investors, and later another $45 billion from the International Monetary Fund – the largest amount ever signed at once.”
Debt leads to inflation
To repay the debt, Argentina’s central bank is constantly printing new money. This drives up inflation. The consequences of the corona pandemic and the war in Ukraine combined with fluctuations in global energy prices and a major regional drought in Argentina are exacerbating the problem. The drought also led to soybean harvest failures. Soy is Argentina’s most important export.
Argentina can produce and export everything the world needs.
Despite the bad situation, Leandro Mora Alfonsin sees a way out of the crisis: “We have to stabilize the economy and restore order. The resources for this are limited. Because of our debt, we no longer receive international credit, but we can produce. Argentina can produce and export everything the world needs.”
The signs for Argentina’s economy look paradoxically good in the medium and long term. Trading in raw materials such as natural gas or lithium could bring money back into the state coffers, according to the economist. First, a new government must implement urgently necessary austerity measures in order to get inflation under control.