June 25, 2021
1. Government reached an agreement with Paris Club and avoided default
Economy Minister Martín Guzmán announced the payment of USD $430 million to the Paris Club and agreed upon an extension for reaching a definitive agreement to March 2022. In this context, the minister once again ruled out the possibility that the government will carry out a devaluation in the coming months. “The real exchange rate is fine, we are getting stronger and stronger,” he stated in declarations to the program Minuto Uno, broadcasted by C5N. In the last few days, a Morgan Stanley report was published which highlights that Argentina could devalue more rapidly in the coming months. Guzmán was forceful in pointing out that most of the problems were generated by the government of Mauricio Macri, which “had left a very brutal shortage of dollars. That means less production capacity, less employment generation, more inflation, and unsustainable debts in dollars.” In order to reach an agreement with the IMF, the government must show solid evidence that the country is able to comply with its debt obligations. In this respect, Guzmán said that “the economy is recovering in spite of a pandemic that continues to affect the entire world.” Regarding inflation, the minister insisted that it is in fact decreasing, “the reality is that we are on a month-to-month trend – obviously with seasonality issues – but it is decreasing.” He also stressed that, although price agreements “are necessary at this moment, they do not define inflationary policy in itself.”
2. City of Buenos Aires relaxes lockdown measures
Buenos Aires Mayor Horacio Rodríguez Larreta held a press conference that established new measures to be implemented in the city, which will serve to deepen the current strategy. The strategy has three pillars: strengthening the health and testing system, the vaccination plan and individual responsibility. As of Friday, bars, stores, gyms, and banquet halls will be able to accommodate a maximum capacity of 30%. Theaters and religious celebrations may be held at 50% capacity. Outdoor sports will have no limits on the number of participants. On the education front, all high school students will return to full attendance beginning July 5. Regarding the health situation, Rodriguez Larreta informed that, “the average number of daily cases dropped in the last four weeks from 2,700 to 1,200,” continuing, “This decrease is starting to impact on the occupancy of intensive care units, which dropped from 77% to 60%.”
Buenos Aires Ciudad: Cómo sigue la situación sanitaria en la Ciudad: las nuevas medidas
3. Exports reach the highest level since 2014
The Argentine statistical institute (INDEC) indicated that in May 2021, exports grew 33.2% inter-annually and imports by 62.4%. As a whole, trade increased 44.4%, and reached a value of USD $11.9 billion dollars. The trade balance recorded a surplus of USD $1.62 billion, and marked the highest value reached in the last 12 months. In May, the export indicators that most increased were value and price since quantities fell 1.9%. In the case of imports, “all indicators increased,” according to the INDEC report determined. Agricultural goods (MOA) reported the sharpest increase at 48.5%, for USD $4.12 billion. In total, soybean and its derivatives reported USD $9.3 billion between January and May, an increase of 61.5% with respect to the same period last year. It also represents one out of every three U.S. dollars that entered Argentina through exports.
Radio Perfil: INDEC: las exportaciones alcanzaron el mayor nivel registrado desde junio de 2014
Télam: El Intercambio comercial de mayo dejó un superávit de US$ 1.623 millones
La Voz: Gracias a la soja, las exportaciones son las más altas desde 2013
4. Government regulates benefits of the Knowledge Economy Law
Through Resolution 5013/21, published in the Official Gazette, the Argentine tax agency (AFIP) enabled the benefit of zero export duties for service exporting companies included in the Knowledge Economy Law and registered in the National Registry of Beneficiaries of the Regime for the Promotion of the Knowledge Economy (EDC Registry). Although the decree was published six months ago, the benefits will come into force as of now. The companies that will be able to access these benefits are those that previously paid 5% export duties. In this sense, the sector’s business chambers presented in February a work plan that expects to generate half a million jobs and exports in the order of USD $10 billion per year in a decade. The regime, created by Law 27,506, aims to promote new technologies, generate added value, promote quality employment, facilitate the development of SMEs and increase exports of companies engaged in knowledge-based services. In view of this, AFIP stated in a press release: “The amendments to the law have made it more progressive, equitable, federal and supportive.”
5. Argentina downgraded to “Standalone Market” in Morgan Stanley Index
As expected by the market, the MSCI (Morgan Stanley Capital Index) decided to move Argentina from its “Emerging Market” category to “Standalone.” “Since September 2019, international institutional investors have been subject to the imposition of capital controls on Argentina’s stock market,” said Craig Feldman, global head of indices Management Research and a member of the MSCI Index Policy Committee. In view of this re-categorization, Argentina will share status with other countries in the region such as Panama, Jamaica and Trinidad and Tobago. At the international level, Bosnia and Herzegovina, Bulgaria, Malta, Ukraine, Botswana, Zimbabwe, Lebanon and Palestine are also included the category. Argentina had managed to regain the emerging category in May 2019, but the devaluations and the exchange rate fall that followed and the strong hit that Argentine assets took place following last year’s primaries diluted that achievement.