Argentina levies exporters to tackle 'emergency'

  1. G20 finance ministers met during current turbulence over tariffs
  2. Many Argentines loathe IMF after previous intervention
  3. 'Corralito', coin termed by a journalist, summed up harsh austerity measures

Argentina is introducing new austerity measures and taxes to counter the effects of a deepening economic crisis, President Mauricio Macri announced September 3 in a televised address. (Sky News)

In a 25-minute recorded statement (subtitled in Spanish), Macri said that taxes on exports of some grains and other products will rise and “less than half” of the nation’s government ministries will be abolished, even if it was not announced which ministries will be closed or merged.

Argentina is the biggest exporter of soy meal and soy oil and is also a big producer of corn, wheat and raw soybeans.

From January 1, those primary exports will be taxed four pesos for every dollar in value. Processed products will be taxed three pesos for every dollar in value.

Macri, who was kidnapped by police officers in 1991, made a confession about the difficulty of handling the economic crisis.

“For me it is not easy, I want you to know that these were the worst five months of my life after my kidnapping, but not for a minute I stopped doing what I could to face with you what we are living.” (Clarín, in Spanish)

Last week, Argentina’s central bank increased the amount of reserves banks have to maintain, attempting to bolster the currency with strict fiscal discipline.

The announcement made interest rates to rise from 45 to 60 percent, a hike that is not to be lowered anytime before December. (CNBC)

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It comes after President Mauricio Macri announced the request to unlock disbursements from a $50 billion credit line the country obtained in June from the International Monetary Fund (IMF), so the country can show enough cash on hand to fund their 2019 budget without going further into debt. (The Guardian)

Instead of easing the markets, Macri’s two-minute televised speech raised alarm about Argentina’s ability to stick to budgets and prompted a steep 7 percent drop in the currency, totaling an all-time low of 49 percent in 2018. (Reuters)

The South American country’s long history of financial crises has seen default twice in this century, including the 2001-02 economic crisis and debt default that made one of the most stable economies of the 20th century fall into poverty.

However, economist Matías Carugati maintained that, “the risk of a default is exaggerated.”

“Argentina does not have a solvency problem, but more a short-term liquidity issue. It’s urgent to achieve financial calm and then see how to repair the damage.” (France 24, includes video)

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In July, thousands voiced their opposition in the streets of Argentina at the weekend while head of the International Monetary Fund (IMF) Christine Lagarde was in Buenos Aires chairing a meeting of G20 finance ministers. (Al Jazeera video report)

Social organizations led the protests amid fears austerity measures by President Mauricio Macri’s government could worsen the country’s feeble economic situation. However, Lagarde highlighted the advances “in terms of monetary policy,” meaning that measures taken by the IMF “have managed a better situation, with less volatility and more transparency.” (Reuters)

Buenos Aires was the heart of world trade as G20 representatives arrived on Friday July 20 to meet in Argentina’s capital. Global trade tensions were moving beyond rhetoric into a volley of tariffs and counter-tariffs. Popular demonstrations against what is seen as the return to “corralito” austerity measures (Deutsche Welle / video in Spanish) brought thousands on to the streets, opposing IMF intervention.

“Corralito” was the term for drastic measures taken 15 years ago to save the Argentine economy, which included freezing many people’s bank accounts.

Critical questions on the agenda at the weekend were concerns raised by the EU, China and Canada about recent U.S. trade policies. The finance ministers’ gathering also addressed crises threatening a number of emerging economies — not least in the host nation, which recently accepted a $50 billion (€42.7bn) IMF loan to try to stabilize its economy (Reuters / AFP).

Union leader Juan Carlos Schmid of the CGT warned of a possible increase in social conflict “if the IMF’s recipes are applied.”

“If the IMF comes to seek the social consensus they have requested, they must know it will not have the support of the organized workers, and that a situation of this nature will open an infinite conflict,” Schmid said. (Página 12 / in Spanish)

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President Mauricio Macri discussed the government’s fiscal and monetary strategy with IMF head Christine Lagarde at a one-to-one meeting in his residence, Quinta de Olivos. The Argentine leader was expected to insist on his commitment to the deal agreed with Washington.

Lagarde has a personal affinity with Macri, and his office wants the IMF managing director to publicly support the program, to scare away the ghosts of 2001’s corralito. Some reassurance would also be sought in the face of a request — if needed — for a future deal waiver (Clarín / in Spanish).

President Mauricio Macri has prepared a package of reforms to reduce fiscal deficit and attract foreign investment. Credit: Gobierno de la Ciudad de Buenos Aires [CC BY 2.0], via Flickr.

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