argentina-brief-background-575As Argentina Strategic Brief has consistently reported since Mauricio Macri’s 10 December 2015 inauguration, his administration has been applying gradual policies to eliminate the many major distortions caused by more than a decade of populism under Néstor Kirchner (2003-2007) and Cristina Kirchner (2007-2015). The need to win next year’s election is, however, now leading the government to soften some of these measures.

The reduction of consumer subsidies has been delayed by court rulings (see Argentina Strategic Brief – 09.16) and, in order to avoid more negative judicial resolutions, prices of public services will now be adjusted in accordance with an extended timetable.

A very large public works programme is being financed through the issue of bonds both in Argentina and abroad. A comparatively small debt-to-GDP ratio, greater world liquidity, and very low interest rates in developed markets, favours this strategy. But large incoming financial flows are causing the further real-term appreciation of the Argentine peso, and this is therefore discouraging the transformation from a consumption led economy to an export driven economy that was envisaged at the end of 2015.

The announced goal of the gradual reduction of the primary fiscal deficit is being postponed. In 2015 it was 4% of GDP. This year, respected economic analyst Miguel Ángel Broda believes that it will be at least 4.8%, and may even reach 5.1% of GDP.

Fiscal needs have forced the Administration to postpone the promised 5% reduction of export duties on soy and soy products.

The implementation of a permanent official dialogue between government, business leader and labour to discuss economic and social issues is becoming more probable. Minister of Finance, Alfonso Prat Gay, who is a firm supporter of this idea, stated that, if this forum had existed since the beginning of the year, inflation would have been lower, and the recession shallower.

This is an excerpt from an article in this month’s Argentina Strategic Brief – for more information please contact us at