September 20, 2019
1. Economic panorama
In the last hours of yesterday, the government sent a bill to Congress to create the necessary bases to modify the terms of the USD 32 billion debt. It includes the collective action clause for the set of bonds issued under national legislation. On the other hand, in a bid to stabilize the price of the peso, the Argentine Central Bank abandoned its goal to avoid printing more money to boost the number of pesos in the economy by 2.5% this month and October. This relaxation of monetary policies hopes to breathe new life into a cash-short economy. Additionally, the central bank raised its benchmark interest rate 20 points to 78% through the end of September before lowering it to 68% in October anticipating a rate drop would not set off the prices of dollar-pegged indicators. On a different note, businesses and individuals who sell services abroad started to feel the sting of the recent central bank measure requiring dollars earned to be converted to pesos with a five-day span, with banks required to convert all earnings to pesos the moment they enter accounts. Through these measures, the government hopes to maintain a steady exchange rate and stabilize the central bank’s reserves without risking economic volatility through the remainder of his term ending in December.
2. IADB meets with Mauricio Macri and Alberto Fernández
Inter-American Development Bank (IADB) President Luis Alberto Moreno met with Argentine leader Mauricio Macri and Finance Minister Hernán Lacunza. During the meeting, the conversation focused on the progress of two public works projects financed by the IADB and on the administration’s agenda. Officials will meet again next week in Washington, where the minister will participate in the entity’s 60th anniversary celebrations. After meeting with Macri, presidential candidate Alberto Fernández received Moreno and his associates at his offices. The objective of this meeting was to establish a conversation on the country’s current economic situation and the Frente de Todos candidate’s plans should he win October’s general elections. Also in attendance was Santiago Cafiero, grandson of historic Peronist leader Antonio Cafiero, as well as Christian Asinelli, an ex-legislator for the city of Buenos Aires. Alberto Fernández referred to the meeting on his Twitter account stating: “I assured them that Argentina will comply with its external commitments, but in order to do that we have to grow first”. In addition, after his tour of Spain and Portugal, the Frente de Todos candidate traveled to Bolivia where he met with President Evo Morales. He will then continue his tour in Peru. Meanwhile, President Mauricio Macri raised the tone of the electoral campaign and called for a massive march in support of his government.
3. Austria to veto EU-Mercosur agreement
1On June 28th, the EU and Mercosur finalized a trade agreement – still pending ratification – following 20 years of negotiations. Following criticism of the treaty on the part of the French government, the Austrian Parliament approved a motion that will veto the agreement in the European Council. The veto was supported by all parliamentary parties (social democrats, Christian democrats, ultranationalists and leftists), with the sole exception of the Liberal NEOS, the sole party in support of the trade deal, albeit with some modifications. The Austrian government is required to apply this veto at the European Council, the body tasked with ratifying the accord together with the European Parliament and EU member states. With the general guidelines and bureaucratic aspects of the deal still under negotiation, the next step involves discussion and approval by European legislatures. In the case of the EU Parliament, approval requires a qualified majority: 16 of 28 member states must vote in favor as long as 65% of the EU’s population is represented.
El Cronista: Austria vetará el acuerdo de la UE con el Mercosur
4. Congress declares food emergency through 2022
With rising social pressure and massive protests on the part of social movements demanding a closer attention to the lower socioeconomic levels, the Senate unanimously approved a norm that increases state funds to soup kitchens. The financial cost of this measure will total USD $175 million and come from “reallocated budget” originally earmarked for public works. Initially, the government tried to avoid discussing the Food Emergency Law, but the gravity of the economic crisis and electoral needs ended up reversing the administration’s position. The project is in line with the new economic measures taken by the government since the defeat suffered in August’s primary elections, looking to compensate the sectors of the population hit the hardest by the crisis. On the other hand, the unemployment rate reached 10.6% in the second quarter of the year (more than 2.1 million people). These data were disseminated by the Argentina´s national statistical agency (Indec).
5. Fuel prices are “unfrozen”, leading to the sixth increase
A month after freezing fuel prices for 90 days, the Macri administration decided to relax the measure, allowing oil companies to hike fuel prices up to 4%. In this regard, the government justified the sixth fuel price increase in 2019 due to the rise in the price of oil, following the attack to Saudi Arabian refineries. The initial measure had used values registered on August 9th as a starting point, when the exchange rate was 23% lower than the current one.