Argentinian President Alberto Fernández’s decision to increase taxes for the thriving farm sector and wealthy individuals to pull Latin America’s third-largest economy out of a three-year recession has rankled business leaders who have been reducing their investments in the country.
The Wall Street Journal interviewed Javier Rotondo, a farmer, who said the country’s move to temporarily suspend food exports to limit food pricing, plus new taxes, have crippled him financially.
He told the Journal, “They’re implementing crazy policies that don’t make much sense.”
The paper described a desperate economic climate in the country of 48 million and said Buenos Aires’ economy is as bad as it has been since 2001 when there were deadly riots. The Federal Reserve Bank of San Francisco identified the culprit of the 2001 crisis as the country’s “persistent inability to reduce its high public and external debts.
“These made the economy vulnerable to adverse economic shocks and shifts in market sentiment,” the report said.
The country’s economy contracted by 10 percent in 2020 during the COVID-19 outbreak, and its poverty rate hit 44 percent, the paper reported, citing the Catholic University. (The newspaper El Pais reported that in 2002, when the country collapsed, its GDP was “only slightly worse” at 10.9 percent.)
The Journal reported the country has about $5 billion in cash and gold reserves, and it has debt payments that are due to the International Monetary Fund. The country’s government has barred companies from reducing work staff and paid 50 percent of salaries to workers at “tens of thousands of small businesses,” the paper said.
The El Pais report said Argentina relies on its agriculture sector, which is responsible for the employment of over two million, or 14 percent of the country’s workforce. Fernández, who is a member of the nationalist Peronist movement, hopes that as the world recovers from the epidemic, the country will benefit from higher prices on grain exports, the Journal reported.
Martin Guzman, the country’s finance minister, said at a conference last month he hopes the economy bounces back and cuts its budget deficit to about 6 percent of its annual economic output compared to 8.5 percent last year, the Journal reported.
TRENDPOST: Mostly forgotten and barely reported is that in 2018, under the regime of its former president Mauricio Macri, the “pro-business” leader saddled the nation with a $57-billion debt to the IMF.
The Argentine peso crashed in mid-2018 after the country entered a recession in the year’s second quarter. The peso lost more than half its value that year and fell more than 35 percent in 2019.
Before the COVID War began, Argentina’s economy contracted at a rate of 3.1 percent in 2019. Inflation is rampant, reaching 52.9 percent in December. It’s estimated more than 40 percent of the country’s 44 million people now live in poverty.
According to the IMF, it “is not economically nor politically feasible” for Argentina to fully repay its more than $100 billion foreign debt.
TREND FORECAST: When the “stimulus” money dries up, interest rates rise, equity markets crash, and the world descends into the “Greatest Depression,” social unrest will escalate in Argentina and nations across the globe.
The wars between the people and politicians will become common battle cries as the rich continue to get richer and the masses sink lower into economic despair.
