Sunday, May 19, 2024

ARGENTINA | 23-12-2019 17:23

Cafiero: Government will approve emergency economic measures today

"The enactment will be today," says Cabinet Chief.

Alberto Fernández's government will approve the package of emergency measures aimed at lifting the country out of its worst economic crisis in years later today, says Cabinet Chief Santiago Cafiero.

Argentina is in a recession provoked by a currency collapse that struck the country 18 months ago and has seen poverty levels rise to more than 40 percent.

"The enactment will be today," said Cabinet Chief Santiago Cafiero as he arrived at the presidential palace on Monday, referring to the publishing of the new law in the Official Gazette (Boletín Oficial).

Fernandez's plan involves tax hikes on foreign currency purchases, agricultural exports and car sales. The government says the tax hikes will only affect the upper and middle classes.

The bill passed the lower house of Congress on Friday and the Senate on Saturday.

Fernandez said Sunday Argentina was in "virtual default" of its foreign debt that stands at around 90 percent of GDP. He described this crisis as almost as bad as that of 2001 when Argentina defaulted on a US$100 billion debt.

"It is not the same as 2001, but it is similar. At that time poverty was at 57 percent, today we have 41 percent poor people; then we had a debt default, today we are in virtual default," Fernandez said in an interview with TV programmw La Cornisa on Sunday.

The new law will allow the Executive extra powers over finance, tax, administration, pensions, tariffs, energy, health and social issues.

The government's aim is to "attend to the needs of the most vulnerable sectors and to put all its efforts to recover aggregate demand and spark growth," Social Security Administration chief Alejandro Vanoli said.

The government has vowed to "tackle hunger" and has announced a 10,000 (US$160) peso bonus for pensioners and a six-month freeze on public utility prices.

"It's a difficult situation, it's a country that has had to restructure its debt, with a deep fiscal and financial deficit, in a situation of recession and inflation," said Vanoli.

"The state is putting all its efforts into those suffering the most from the social situation."

Ex-president Mauricio Macri had planned in September to negotiate a restructuring of debt repayments with the International Monetary Fund, with which he'd agreed a $57 billion bail-out loan last year.

Argentina has already received US$44 billion of that loan but Fernández says he'll refuse the remaining disbursements.

He says he's inherited a "dramatic situation."

Argentina's economy is expected to shrink by 3.1 percent in 2019, inflation is hovering around 55 percent and unemployment is rising to 10.5 percent.

"That's what we inherited. We can't face up to it and pay the obligations that we've been landed with," Fernandez said on Sunday, as he made comparisons with the 2001 crisis.

"We had massive unemployment, we also have that now. What we didn't have[then] is inflation [but] now we have it."

On Friday, Argentina unilaterally postponed a US$9-billion maturities payment until August, a move that saw rating agencies Fitch and S&P downgrade its credit rating. They consider Argentina in selective default.

"We're in a huge freefall ... in two years Argentina has massively increased its debt," said Fernandez.

Argentina owes US$330 billion, around 90 percent of its gross domestic product.

That figure was around 20 percent in 2016, soon after Macri came to power.

One of Argentina's main problems is its people prefer to hold dollars rather than pesos, meaning they try to sell their local currency and often keep their dollars in foreign bank accounts.

"Argentina has no more dollars. Macri lost US$100 billion. Argentina needs dollars to come back in," said Fernández, who has maintained the monthly US$200 limit of buying foreign currency imposed by Macri last August.

"Dollars are scarce, as there aren't any, they must be expensive" to buy, he said.

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