Rough reality check

ARGENTINA - Report 13 Jul 2018 by Esteban Fernández Medrano

The past weeks have been a rough reality check for a government that is struggling to advance with a now “accelerated gradualism” toward a more stable and productive economy. Despite the Macri government's more predictable political behavior than its predecessors', and its efforts to unwind inherited micro distortions with the intention of attracting investment, the macro picture remains weak at best.

The anti-inflationary strategy applied until April, attempting the Sisyphean task of sterilizing the fiscally driven monetary injections by setting high positive real interest rates, generated a Ponzi-scheme debt dynamic. It was only a matter of time before the market perceived it as unsustainable. With this monetary and fiscal background, the deteriorating current account deficit of the balance of payments added fuel to the monetary fire.

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