Embed Size (px)
Citation preview
Argentina, the Road to 2011:Economic and Political Outlook
Fernando Straface, Executive Director
Lucio Castro,
Director,
International Economics Program
Av. Callao 25, 1° • C1022AAA Buenos Aires, Argentina - Tel: (54 11) 4384-9009 • Fax: (54 11) 4371-1221 • [email protected] • www.cippec.org
AS/COA
New York, April 28, 2010
The leading Think Tank in Argentina, andtop five in Latin America (Foreign Policy)
We conduct high-quality, independent research in all public policy areas
We analyze current public policy events, but with a long run perspective
High impact and agenda-setting capacity
We understand the politics behind the public policies
Key metrics of CIPPEC
Staff of 90; Budget of USD 2.5 million(2009)
Diversified sources of funding
Strong media presence:
1,416 mentions in national media(2009).
455 articles citing or featuringCIPPEC in national newspapers(2009).
40 articles in international media inthe same year (5 from BBC, 4 fromThe Economist, 2 from the NYT, 2from CNN).
47%
23%
17%
13%
Funding sources in 2009 (in %)
International cooperation Governments
Private companies Individuals
Source: CIPPEC
A Long term perspectiveThe last 20 years have not been lost
80
130
180
230
280
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
PPP-Based GDP Index 1990 - 20091990 = 100
Argentina Brazil Chile Peru Uruguay
Source: CIPPEC based on IMF (2010).
The fiscal front: a problem, not a crisis
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
2005 2006 2007 2008 2009 2010* 2011*
Federal Goverment Primary Expenditures
a share of GDP2009 - 2011
Wages & Salaries Current transfers to the Private sectorCurrent transfers to Provinces Other expenditures
0,50%0,39% 0,92% 1,77%
0,72%3,27%
3,83%2,90%
3,25%4,73%
4,51%5,82%
7,47%8,27%
0,11%0,39%
0,32%0,64% 1,20%
2,80%2,09%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
2005 2006 2007 2008 2009 2010* 2011*
Federal Goverment revenues as a share of GDP
2009 - 2011
Domestic taxes Export Taxes Contrib. to Social Security
Property Income Taxes Other revenue
Source: CIPPEC based on MECON and private sources.
Inflation tax
SSS transfers
6,1%
28,6%
23,2%
13,6%
25,0%
13,9%
3,3%
32,7%
25,9%
22,9%
33,3%
18,9%
0%
5%
10%
15%
20%
25%
30%
35%
2006 2007 2008 2009 2010* 2011*
Y.o.y Federal Goverment Real Revenues and Primary
Expenditures Growth Rates2006 - 2011
Revenues Primary Expenditures
Source: CIPPEC based on MECON and private sources.
Fiscal deficit is likely to remain small in 2010-2011
Recent Kirchner’s policies (inflation financing and stock confiscation) are no longer an option
Using FX reserves is also costly politically
BUT domestic financing via a bond to local banks is available
Plus, the debt restructuring might open the way to a limited return to international markets
The fiscal front: a problem, not a crisis (II)
-1,50%
-1,00%
-0,50%
0,00%
0,50%
1,00%
1,50%
2,00%
2,50%
2007 2008 2009 2010* 2011*
Primary fiscal surplus needed to face the sovereign debt 2010 - 2011
Baseline
Scenario I - successful debt restructuring
Scenario II - GDP growth 5.6% in 2010 and 3.5% and 2011Scenario III - GDP growth 4% in 2010 and 2.8% in 2011Scenario IV - Inflation rate
The fiscal front: a problem, not a crisis (III)
Bye, bye stop and go?The soybean´s dollars rainfall
30
40
50
60
70
80
90
100
110
120
100
200
300
400
500
600
700
20
08
/0
9
20
09
/1
0
20
10
/1
1
20
11
/1
2
20
12
/1
3
20
13
/1
4
20
14
/1
5
20
15
/1
6
20
16
/1
7
20
17
/1
8
20
18
/1
9
20
19
/2
0
Th
ou
sa
nd
m
etr
ic t
on
es
Mil
lio
n m
etr
ic t
on
es
Agricultural production long term projections 2008-2020
Beef Total crops
Source: own calculations based on USDA (2010)
-6.000
-1.000
4.000
9.000
14.000
19.000
24.000
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
80.000
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
*
Tra
de
su
rplu
s
Ex
po
rts a
nd
im
po
rts
Exports, imports and trade surplus (in u$s millions)
Trade Surplus Exports Imports
Source: CIPPEC based on INDEC and private estimatesSource: Own calculations based on USDA 2010
Out of the woodsThe end of the recession
Labor demand index
Source: CIF-UDT (2010)
Accelerating inflationwith unanchored expectations
Source: own calculations based on non-audited provincial statistical offices
Inflation expectations
in the next 12 months (national)
Source: CIF-UTDT (March, 2010)
April 10Media: 30%
Median: 31%
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
35,0%
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
3,0%
3,5%
4,0%
en
e-0
7
ab
r-0
7
jul-
07
oct-
07
en
e-0
8
ab
r-0
8
jul-
08
oct-
08
en
e-0
9
ab
r-0
9
jul-
09
oct-
09
en
e-1
0
y.o
.y in
fla
tio
n r
ate
m.o
.m i
nfl
ati
on
ra
te (
%)
Monthly and annualized inflation rates (%)
m.o.m y.o.y
Expected nominal depreciation for 2010 is 10%/12%
With a 25% inflation rate, the AR $ will inevitably appreciate in real terms
Inflation differential with and devaluation of main trading partners are the other drivers
Exchange appreciation could be a concern in 2011
Looking for a nominal anchorThe road to FX real appreciation?
Real Multilateral Exchange Rate Index2001=1
Source: Analytica (2010)
Jan-Oct. variation
US BRASIL EU CHINA RMER
An impossible mission? The road to lower inflation in 2011
0,0
5,0
10,0
15,0
20,0
25,0
-3 -2 -1 0 1 2 3 4 5 6
y.o
.y in
fla
tio
n r
ate
Years before and after stabilization
Dinflation. The Emerging Markets Experience
Peg Non-Peg
The region shows that monetary policy works:
Inflation targeting and restoring CB and INDEC credibility are the road to follow.
A drastic fiscal adjustment is no needed.
Slowdown of public expenditure growth rate.
Reduce subsidies along with a social tariff and VAT for “poor-goods”.
Coordinate expectations. Source: CIPPEC based on IMF/WEO (2010)
Disinflation: the Emerging Markets Experience
In the best of the worlds?Favourable TOT and rapid growth in main trade partners
100
150
200
250
300
350
400
18
10
18
20
18
30
18
40
18
50
18
60
18
70
18
80
18
90
19
00
19
10
19
20
19
30
19
40
19
50
19
60
19
70
19
80
19
90
20
00
Terms of Trade 1810 - 2008Long term trend and average
1810 = 100
Long term trend Average
Source: own calculations based on INDEC and Ferreres (2006)
0
50
100
150
200
250
300
350
400
450
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
15
20
20
Commodities prices in constant USD 1990 - 2020
Corn Soybeans Wheat
Source: CIPPEC based on USDA and World Bank projections
A promissing future (if we get to 2011 relatively unharmed)
Relatively low Debt/GDP, mostly in local currency and with a comfortable payments profile
Still manageable fiscal situation
Trading partners growing at high rates in the long term; very favorable terms of trade
Confidence deficit could be relatively easy to reverse with reasonable macro policies.
The beginning of an investment boom?
Now, the politics…
Growing dissatisfaction with the Government
3328
74
49 64
27
4134
27
6265
18
40
23
68 5462
70
-40
-20
0
20
40
60
80
100
M A O N J F M J A O N D J F M A M J J A S O N D JF M A M J J A S O N D J F M
2006 2007 2008 2009 2010
%
Diff. (+) (-) Approve Disapprove
Presidential approval
Source: Poliarquía Consultores
Conflict with theagricultural sector
Lost in mid-termelections
Government has lost popular support since March 08
Mid-term elections reinforced Government’s alienation
Policy challenges are of medium complexity,
but the current political climate is
tense:
0
10
20
30
40
50
60
70
80
90
MAONEFMJAONDEFMAMJ JA SONDEFMAM J JASONDEFM
2006 2007 2008 2009 10
%
M ejoró Se mantuvo igual Empeoró
Source: Poliarquía Consultores
Perceptions on inflation have worsened
Improved Stayed the same Worsened
0
10
20
30
40
50
60
70
80
90
MAONEFM JAONDEFMAM J JA SONDEFMAMJ JA SONDEFM
2006 2007 2008 2009 10
%
M ejoró Se mantuvo igual Empeoró
Source: Poliarquía Consultores
Same thing regarding poverty
Improved Stayed the same Worsened
0
10
20
30
40
50
60
70
80
90
MAONEFM JAONDEFMAM J JASONDEFMAM J JA SONDEFM
2006 2007 2008 2009 10
%
M ejoró Se mantuvo igual Empeoró
Source: Poliarquía Consultores
…and corruption
WorsenedStayed the sameImproved
Politics affect the policy agenda
Stalemate in Congress since December 10th, specially in the Senate
Unstable, minimal coalitions, defined in a bill-by-bill basis
Government is willing to raise the stakes against a renewed but fragmented opposition
No willingness to promote political dialogue: paralysis and legislative deadlock
Political crisis without governability crisis
Low chances of change of direction until the next presidential election
How the presidential election looks today?
0
10
20
30
40
50
60
Positive and negative image of potential candidates
Positive
Negative
Source: Poliarquía Consultores
The candidates’ political compassState-oriented
Market-oriented
Confrontational style
Cooperative style
Néstor
Kirchner
Solanas
Carrió
Alfonsín
de Narváez / Scioli Macri/
Reutemann
CobosDuhalde
Source: Poliarquía Consultores and CIPPEC
Political outlook, 2010-2011
Until next presidential elections, the political arena will focus on:
Inflationary pressures
International isolation
Confrontational dynamics in the domestic front
In short
Argentina continues to enjoy an extremely favorable international economic context
Policy challenges show some complexity, but not as dramatic as those of 1989-1990 or 2001-2002
Politics will be fluid until Presidential elections, but a major crisis is unlikely
Growing negative consensus among opposition forces to avoid the continuation of “bad policies”
Contact Info
Fernando Straface
Executive Director
Lucio Castro
Director,
International Economics Program
