Argentina’s economy will edge higher this year as the new government lifts interventionist controls, later fuelling growth of about 4.5 percent annually between 2017 and 2019, Finance Minister Alfonso Prat-Gay said on Thursday (January 14).
“With our numbers we calculate an estimated (economic growth) of between 0.5 percent and 1 percent this year in 2016, but above all with much stronger growth in the second half of the year,” he said, during a news conference with foreign journalists in Buenos Aires.
The minister called the estimates a “working hypothesis”. Argentina’s new center-right government, which took office in December, inherited a stagnant economy with double digit inflation, falling exports and low foreign reserves.
“Later, as a working hypothesis, for the three following years our estimate (for economic growth) is 4.5 percent, understand that that is a conservative estimate. [JOURNALISTS ASK FOR CLARIFICATION REGARDING THE PERCENTAGE] Yes, 4.5 percent per year and understand that that is a conservative estimate,” he told reporters.
The government has moved fast to unravel a complex web of controls imposed on Latin America’s third largest economy by the previous administration, aiming to boost exports and investment.
It has floated the peso currency, ended capital restrictions, cut some export taxes and set guidelines for consolidating the large fiscal deficit.
Buenos Aires has also sought to shore up its foreign reserves. Prat-Gay said the central bank would in coming days announce a $4 to 6 billion dollar loan from international investment banks.
“In the coming days the central bank is going to announce the loan from international banks to Argentina’s central bank in exchange for bonds from the central bank and this I think is going to be between 4 and 6 billion dollars and as such we are going to be relaxed in terms of being above the rule (regarding minimum reserves to lift currency control and help economy recover),” said Prat-Gay.
Journalists also took the opportunity to ask the minister about the possibility of a Mercosur – European Union agreement in the near future and whether there were any specific hold ups in the negotiation process.
“We are waiting for an answer from the European Union. Our job is to go forward, we have coordinated it with Brazil, with Paraguay, with Uruguay and we are all pushing in that direction. Venezuela, as you know, is a full Mercosur member but it hasn’t fulfilled Mercosur agreements in the way it is required to do,” he said.
When asked if Argentina was in favour of agreements outside the bloc, Prat-Gay said the administration did not think that was the best course of action.
“We don’t think that would be the best way to proceed. We believe that it’s not just a relaunching of bilateral relations, but rather that Mercosur needs to be relaunched. I think that over the past years, for a variety of reasons, the two main members of Mercosur (Argentina and Brazil) were a bit distracted with other things and this has made it that in some cases one country or another go it alone. We believe that the best way to strengthen ourselves in the area of trade is together and not individually,” he said.
While the new Argentine government said earlier in December that it would seek to suspend Venezuela from South America’s Mercosur trade bloc, it backtracked on its comments after Venezuela’s ruling Socialists took a beating in the December 6 parliamentary elections.
President Mauricio Macri had said he would seek Venezuela’s suspension from Mercosur because of accusations of rights abuses committed by President Nicolas Maduro’s socialist government, saying he would trigger the bloc’s democratic clause to do so. (Reuters)
