June 12, 2020
1. Government plans intervention of soy processor Vicentin
President Alberto Fernández announced his administration will intervene in bankrupt agricultural exporter Vicentin. The company has been insolvent since December with a debt of more than ARS $100 billion (USD $1.44 billion), with the Argentine central bank as its primary creditor, holding 80% of its debt. The measure was announced by the president in a press conference accompanied by Productive Development Minister Matías Kulfas, Senator Anabel Fernández Sagasti and ex-Agriculture Secretary Gabriel Delgado, who will lead the expropriation. Decree 522/20 made the announcement official. President Fernández also reported that the company’s expropriation must be approved by Congress, so Vicentin can become a trust fund managed by government-owned YPF Agro.
2. May monthly inflation at 1.5%
The Argentine statistical agency (INDEC) released its monthly inflation report which revealed a monthly figure of 1.5% – the same as in April. The reason for the stability in the inflation rate is due in large part to the price freeze on nearly 23,000 products falling under the umbrella of the Secretariat of Internal Commerce’s price control program. There was a significant slowdown in the price of foods and beverages, which registered an increase of only 0.7% in May as opposed to 3.2% the month prior. Prices in the clothing and footwear sector, home goods and recreation and culture sectors increased the most. So far this year, prices have increased 11.5%, while this figure reaches 43.4% when measured since May of last year.
3. Government extends double severance pay requirement
Through Decree 528/20 published in the Official Gazette, the national government extended the requirement that companies pay double their normal severance in the event a worker is dismissed by 180 days. The decree confirms that its scope will not be applicable to contracts signed after December 13th of last year or the national public sector. In this way, workers have the right to double severance through the end of the year if they were let go without just cause. Minister of Labor, Claudio Moroni, assured that the measure was carried out to protect against situations not within the reach of the prohibition on dismissals through the end of July.
4. World Bank estimates Argentine GDP will fall 7.3% this year
The World Bank released an estimate that Argentina’s GDP will fall by 7.3% in 2020, largely as a result of the coronavirus pandemic. Nonetheless, the financial institution added that the country could see an increase in GDP in 2021 provided it registers an increase in demand driven by consumption and investment and reaches an agreement with bondholders in its external debt restructuring process. In Latin America and the Caribbean, a similar decrease of 7.2% is projected as an average across the region.
5. Government increases budget by ARS $40 billion
The Argentine government carried out a series of budget modifications for national public administration, increasing spending by nearly ARS $40 billion (USD $576.5 million). The primary destination of the additional budget will be “social spending” linked to the coronavirus pandemic, including reinforcing the Emergency Family Income (IFE), the Emergency Assistance Program for Labor and Production (ATP) and food cards. Moreover, the government increased spending on health, capital expenditures and AySA, the state-owned water and sanitation supplier.