The economy, in intensive therapy (on its own merit), will hardly improve

Even in this case, the case of Argentina seems to have a life of its own and flew away, not only from the clan of the most risky emerging countries, but also from their peers in the region. Just compare the risk premiums of the country of Argentina with those of Latin America. According to the EMBI Latam index, regional risk has only increased by 9 points to 201 points from mid-April to May 7, while that of Argentina has made it 116 points to 917 points. In other words, the gap between Argentina and Latin America has been extended by 107 points to 716. But since the deterioration of prospects, that is to say say since the beginning of last February, the Argentine risk has risen by 282 points and that of Latin America by 8 points. The gap between the two risks has therefore increased by 274 points. It is clear that the local risk has increased but that of the region has remained almost stable. It is therefore pure Argentine risk, it is not the fault of the external context. It's the own merit.

Even if you take the premiums evolution of emerging countries considered high risk such as Ukraine, Ecuador, Egypt or India, even Turkey itself It is clear that the Argentinean risk has been lifted from these couples. While Argentina has spent in the past three months levels of just over 600 points similar to those of Ukraine and Ecuador, although far from Egypt and India, quartet has shown stability and has even reduced certain levels of risk. That is, Argentina is where it is on its own initiative.

Something similar is also happening with emerging currencies. In recent weeks, despite the announcement of new measures, the peso stands out as the currency that has depreciated the most against the dollar. Argentine financial badets have also suffered.

Therefore, the sharp increase in financial instability and exchange rate of the Argentine economy is an inherent problem in this country. As the Broda study points out, "it is not a sudden stop that affects everyone emerging, it is an exclusively Argentinian problem". The causes? Obviously, there is a political ingredient recently reinforced by polls that would mark a possible victory of Cristina Kirchner on Macri. But all this is framed by the economic ingredient: the second program with the IMF failed to break the inflationary inertia and improve the level of activity, which fed the fears of investors before the return possible populism. This in no way contributes to the loss of credibility of the BCRA, which has changed monetary policy four times in seven months, nor to the measures recently announced by the government to mitigate the loss of purchasing power and to curb credit. ;inflation. The content of the recession indicates that it is the strongest of the last five. The number of negative economic indicators in the short term is almost similar to that of 2001 or 1989. It would appear that activity would have reached its lowest point in March, but recent data indicate some drag on the reprise. In this sense, the collapse of credit to the private sector in pesos constitutes a burden for the level of activity. Since last May, the last month of real credit growth, the total stock of private credit in pesos has declined until April by more than 38%.

However, given the current currency and exchange rate system and the objectives agreed with the IMF, the BCRA's foreign exchange sales, which are approaching when the electoral calendar will be accelerated, will imply a strong absorption of the pesos. In other words, the monetary base will be considerably lower, even to that established with the IMF. As a result, a significant impact on the already deteriorated private credit is taken into account, leading to the expectation that private financing will not be a driver of recovery, at least during this year. For example, it is estimated that all loans granted by ANSES amount to one month of consumer credit from the private sector. The economic difficulties favor the electoral objectives of the ruling party. A serious challenge