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ECONOMY | 26-05-2018 08:17

Protesters decry IMF talks as Macri's economic reshuffle brings respite

Thousands swarm downtown on 25 de Mayo to protest the government seeking financial help from IMF. Government’s bid to keep peso under control seems to pay off as president takes series of measures to streamline economic team.

After some heav y turbulence in the last two weeks, the economy appears to have been temporarily stabilised somewhat, after President Mauricio Macri took a series of measures this week to streamline his economic team and a successful refinancing of shortterm paper helped to keep the value of the peso under control.

However, despite the relative positivity of the early part of the week, the usual peace of the 25 de Mayo national holiday was punctured by a massive protest yesterday as thousands swarmed downtown Buenos Aires to protest against the decision to request assistance from the International Monetary Fund (IMF) and criticise the direction of the economy under the ruling Cambiemos (Let’s Change) coalition.

Earlier on Friday, the President attended the traditional Te Deum service at the Metropolitan Cathedral, where Cardinal Mario Poli took a few jabs, asking Macri and his administration to “protect the poor.” Hours later, and while a smiling Macri lunched on locro at the Olivos Residence, a large crowd gathered on 9 de Julio avenue under the slogan: “The Republic is in Danger.” The march was led by union leaders, human rights organizations, and leftist political movements including the Kirchnerite La Cámpora group.

As Macri reiterated his aim of “defeating poverty” at Olivos, the political opposition’s show of force was heavy on patriotism. Marching on the holiday commemorating the Revolucion de Mayo, which led to Argentina’s independence from Spain in 1816, demonstrators draped themselves in the national flag. They also held banners protesting high inflation and rises in fuel and transportation costs.

IMF REQUEST

After singing the national anthem, a document was read from a stage, after which several bands played for the crowd.

Praising the role of unions and “neighbourhood political organisations,” the speakers asked the government for “decent jobs to generate richness for the nation.” They also asked for an end to public service price hikes, international indebtedness, and negotiations with the IMF. No clear political leader, however, emerged from the multitudinous crowd.

“All of the policies that have been put in place since the beginning of this government are against the lower classes, the working classes and even against the middle classes,” said protester Marcos Mino. “The pressure that they [the government] are putting on us is really extreme.”

President Macri announced earlier this month that he was starting talks with the IMF on getting a credit line to finance his government, following a sharp drop in the value of the peso. The decision unsettled many Argentines, some of whom blame the IMF for introducing policies that led to the country’s economic implosion in 2001 and its record US$100- billion bond default in 2002. The crisis left one of every five Argentines out of work.

Breaking her silence on the issue, Cristina Fernández de Kirchner spoke out about the IMF deal. The former president and sitting senator for Buenos Aires province wrote a public letter where she called the the current situation “a tragedy,” while defending her and her late husband’s economic policies. Under the Kirchners, Argentina renegotiated or paid off most of its debt after the collapse, kept energy cheap through subsidies and dug deep into the treasury to redirect revenue to the poor through handouts.

For a few years, Argentina enjoyed fast growth fuelled by Chinese demand for its agricultural commodities, but then demand waned and economic growth fell. Macri inherited myriad economic problems from Fernández de Kirchner, including an inflation rate estimated at about 30 percent.

REBOOT

The deteriorating economic climate of the last two weeks has prompted President Macri to reboot his economic team with Treasury Minister Nicolás Dujovne making his début as ‘economic co-ordinator’ on Tuesday while negotiations with the International Monetary Fund (IMF) continued in Washington.

Following expansion of his political kitchen cabinet earlier this month, Macri has now entrusted economic decision-making to all ministers with related portfolios under the co-ordination of Dujovne, who now replaces the two deputy Cabinet chiefs (Mario Quintana and Gustavo Lopetegui) as the focal point of policy.

The nine ministers under Dujovne’s new guidance are: Luis Caputo (Finance), Juan José Aranguren (Energy), Rogelio Frigerio (Interior), Luis Miguel Etchevehere (Agriculture), Francisco Cabrera (Production), Jorge Triaca (Labour), Andrés Ibarra (Modernisation), Guillermo Dietrich (Transport) and Gustavo Santos (Tourism) with the latter two out of town on Tuesday.

The government faced criticism over the all-male make-up of the team this week, as this is seen as an economic not a socioeconomic cabinet with Social Development Minister Carolina Stanley excluded.

Dujovne’s main theme on Tuesday was the need to accelerate budget cuts. Meetings are to be fortnightly for now.

While the edge was taken off the recent crisis by the successful Lebac renewal of May 15, the economic outlook which Dujovne’s ministerial team must confront is increasingly serious.

Especially the macroeconomic, as opposed to the monetary. Lebac renewal is next month’s problem (even if the Central Bank is already working in advance to convert these bonds into longerterm issues) although the dollar brushed extremely close to its new 25-peso ceiling at various times last week before slightly topping it at 25.16 when markets closed on Thursday ahead of yesterday’s public holiday. And when promoting Dujovne, Macri was at pains to beef up the authority of Central Bank Governor Federico Sturzenegger, who last week ruled out any chance of interest rates now around 40 percent quickly returning to their pre-crisis levels below 30 percent.

Yet the currency crisis continues to hit the economy as a whole extremely hard with growth forecasts revised sharply downward and inflation steeply upward. If the 2018 budget projected 3.5 percent growth for this year and there were even hopes of four percent at times in the first quarter, many analysts are now predicting less than two percent as a consequence of two “Ds” – drought (which has reduced export earnings by several billion dollars) and devaluation. The economist Miguel Kiguel forecasts negative growth for the next two quarters.

Previous forecasts have equally been shattered in the case of inflation. While the official inflation forecast of 15 percent had already lost credibility, all economists agreed before the crisis that the final figure would be well below the 24.8 percent of 2017, thus maintaining a downward trend for the second year running.

The last trade figures before devaluation also showed an April trade deficit of US$ 938 million for a total of US$ 3.42 billion in the first third of the year (as against US$ 1.29 billion in the same period of 2017), INDEC statistics bureau reported on Wednesday. The previous April’s deficit had been only USD$ 112 million. Exports rose 6.2 percent last month but imports jumped 22.7 percent.

A report earlier in the week showed that economic activity grew 1.4 percent in March on the same month a year previous, but the figure was a 0.1-percent contraction compared to February. The figure is considered a proxy for gross domestic product.

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