Wednesday, June 12, 2024

ECONOMY | 28-08-2023 15:57

Argentina's unveils measures to mitigate devaluation, inflation

Economy Minister Sergio Massa launches series of measures designed to boost consumption and lessen the impact of recent devaluation and inflation.

Argentina's government has unveiled a raft of new measures that it hopes will boost consumption and compensate for the fall in purchasing power felt amid runaway inflation and the recent devaluation of the national currency.

The measures, announced by Economy minister Sergio Massa in a series of video messages on Sunday, include tax relief for self-employed workers, soft credit for private-sector employees and the payment of one-off bonuses to workers and pensioners. A host of other policies make up Massa's “Programme to Strengthen Economic Activity and Salaries," which the government will boost morale ahead of a key October election.

“The main objective is for each of the sectors of the economy to somehow receive support from the State,” Massa said in the videos, first posted on Instagram.

“Argentina has had a loan with the International Monetary Fund since 2018 which forced us to devaluate our currency over the last few days, in addition to a drought, the worst in our history, which harmed our reserves and figures," the minister told those watching, acknowledging the impact of such steps on "the economy of many families."

In 2018, when Mauricio Macri served as president, Argenetina obtained a US$57-billion loan from the International Monetary Fund that was designed to shore up its economy. The programme, of which Argentina only received US$44.5 billion, failed to deliver stability and it was renegotiated in 2021 by the current government led by President Alberto Fernández.

Among Massa's announcements was the news that Argentina would implement a fund to pre-finance exports to the amount of US$770 million, thanks to contributions from Banco Nación and the Banco de Inversión y Comercio Exterior (BICE).

The economy minister, who is running as the ruling coalition's presidential candidate, also announced the elimination of export duties for selected agricultural products with industrial added value as wine, rice and tobacco, as well as fertilisers.

Argentina's government estimates losses this year from the drought to total some US$20 billion, nearly three percent of the Gross Domestic Product.

Looking to put pesos in pockets, Massa also announced credit lines at subsidised interest rates for workers (running up to as many as 48 instalments) and reinforcement one-off bonuses for pensions and those receiving food aid under the Tarjeta Alimentar scheme.

The measures come after the peso was devalued by more than 20 percent by the Central Bank on August 14 and a rate hike of 21 percentage points to an annual 118 percent.

Argentines are struggling to cope with the impact of runaway inflation, which is currently running at more than 113 percent per annum – one of the highest rates in the world.


Rivals criticise

The measures announced by Massa were strongly criticised by his rivals for the Presidency. Juntos por el Cambio hopeful Patricia Bullrich and La Libertad Avanza lawmaker Javier Milei declared both initiatives were geared towards the campaign and “pushing his candidacy” for Unión por la Patria.

“Economy minister Sergio Massa is mocking everyone. In order to push his candidacy he has taken a series of measures which inflation will eat up in a few days,” declared Bullrich on social media.

“This Argentina suffers and problems are not solved with touch-ups and printing more money. Massa offers explicit Kirchnerite populism instead of providing actual opportunities for Argentines to be able to work and grow”, she added.

“Kirchnerism will be gone for good with me,” concluded Bullrich.

Milei, in turn, uttered a well-known phrase in response: "You can’t expect different results if you keep doing the same”.

“More Keynesianism and Ford Ts. It always fails and it will continue to fail. The issue is time, whether this will collapse before or after the election," he said.



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