The Argentine government is clearly losing its grip on the economy. Amid a money-laundering scandal, its latest move has been to announce a tax amnesty, inviting holders of foreign currency to regularize their situations. The amnesty seeks to channel foreign currency into dollar-denominated public ...

Is the economy headed for recovery? Economic activity indicators are showing signs of bottoming out, which might suggest revival, as happened in 2010 and 2011, in the wake of the 2009 recession. But, unlike during the last downturn, the government today has fewer tools for implementing countercyclical ...

On Friday night, the Argentine government presented a 22-page document to the NY Second Circuit Court of Appeals, containing its proposed interpretation of the pari passu clause to pay holdouts....

The monetization of large federal and provincial deficits is feeding inflation, now running at about 25% per year, and on track to surpass 30%. The government has no other source of financing. Any rational public administration in such straits would be anxious to reestablish access to domestic and ...

In our Monthly report, from December 6, “A New Debt Swap?” we reviewed the background that led Argentina to last Wednesday’s hearing at the NY Second Circuit Court of Appeals in its dispute against the debt holdouts. As we pointed out then, the two key questions that must be addressed are not if Argentina ...

Expansionary monetary policy is a double-edged sword. When an economy is in recession, and deflationary, expansive monetary policies can drive recovery. But if years of inflation end in stagflation, expansionary monetary policies drive stagnation. We believe rising inflation will continue to depress ...

Year 2012 will be remembered as a turning point in Argentina's economic history. The economy has been accumulating distortions and exacerbating its imbalances for many years and now is suffering the consequences. But on top of all this, and since the October 2011 elections, the government has undertaken ...

Argentina’s sovereign bond prices have been enormously volatile in recent weeks, after a surprisingly harsh November 21st U.S. judicial ruling that accepted the legal position of holdouts claiming close $11.2 billion in unstructured, pre-2005, sovereign debt. The judge’s rulings do reflect a certain ...

The consensus view among local pundits states that in 2013 the Argentine economy will be able to recover due to expected positive supply-side shocks. We think that scenario considers only the potential positive news coming from the external sector and rules out the eventual negative news coming from ...

One of the more misleading forecasts of the 2013 budget bill is its 2012 3.4% GDP growth projection, which seems to imply that the government will pay the GDP Warrant at the end of 2013. But though the government has earmarked AR$ 19.4 billion for it in the budget, that’s not the case. INDEC growth ...

Will rising soy prices and a more dynamic Brazil temper Argentine slowdown? Maybe. And last month it grew clear that the Kirchner government was betting on a 2013 economic recovery, in the runup to October 2013 mid-term elections, to push through a constitutional reform that would let her run in 2015 ...

Sliding economic activity and employment, climbing inflation, and parallel exchange rate devaluation all underscore macroeconomic imbalances. Driven by powerful monetary expansion, these factors are pushing investors into foreign currency safe havens. Instead of dealing with the causes of this (inflation),

Nestor Kirchner and Cristina Fernández de Kirchner shared many ideological similarities, but also some significant differences in their economic policies. Nestor Kirchner’s “economic growth model” was built on three variables: a weak trade-weighted real exchange rate, fiscal surplus and trade surplus....

The gap between the official and the so-called “blue” (parallel) market for foreign exchange is sinking the Argentine economy into a severe recession. Since April, the government has completely closed the official FX market for financial transactions. The ongoing devaluation of the “blue” (parallel) ...

The government’s partial nationalization of oil and gas giant YPF in mid-April substantially erodes the national business environment. This illegal move also narrows the subtle political distinctions between Argentina and Venezuela. We suspect that Argentina’s macroeconomic dynamics will start looking ...

As a response to binding financing needs and the apparent determination not to access capital markets, the government once more tapped a source of accumulated local wealth to resolve its fiscal strangulation. This time around the targets were the reserves at the Central Bank that were previously backing ...

Over the last months the governmental authorities had to “fine tune” their “economic-model” to address internal inconsistencies. They showed reflexes to address the immediate problems, but in a way that generates medium term concerns. Here lays one of the main worries of Argentina’s economic outlook: ...

The financial tensions that shook the economy during the last quarter of the year seem to be temporarily subdued. As expected, the government is responding to the first signs of economic slowdown through a combination of monetary expansion and financial repression in order to push interest rates down ...

The world economy is heading towards a slowdown and, eventually, a recession. In 2012, the cloudy external scenario will find Argentina in the midst of an adjustment process induced by both markets and politics. Adjustment #1. The adjustment of the Balance of Payments represents the main economic challenge ...

Ever since the first presidential election of Cristina Kirchner, political analyst and influential economic actors looked for signals of greater rationality in economic policy making. But repeatedly, such expectations were disappointed. Time and again Cristina Kirchner decided “to deepen the model”....

Capital flight averaged 4bn in September and October. The scenario is very similar to that registered since 3Q08 until 2Q09. However, this time around, domestic factors are predominantly explaining the resumption of capital outflows. In our view, the main reason that explains the resumption of capital ...

The slowdown of the world economy, the decline in commodity prices and the controlled devaluation of the Brazilian Real are starting to cloud the Argentine economic horizon. Most economic indicators are showing sings of deceleration and the growth rate reduced from 8% to 6% year-on-year, according to ...

The primary elections reaffirmed that CFK will almost certainly gain a new mandate in October. While such result reduces political uncertainty, it also weakens the chances for a change in economic policy. Argentina’s medium term outlook fluctuates therefore between still sizeable financial cushions ...

There are some signs of an ongoing change in the economic and political context. The consensus view, which anticipated a first round electoral victory of President Cristina Kirchner, has begun to change after the first round election in the City of Buenos Aires, the electoral defeat in the province ...

President Cristina Fernandez de Kirchner (CFK) confirmed that she would be running for reelection in the October elections. She chose as running mate Amado Boudou, the Economy Minister, because in her opinion he made two great contributions to her administration: 1) he brought the idea to nationalize ...