Argentina is the most indebted country in the region – 02/09/2019

Argentina leads by far ranking of the most indebted countries in the region. And it is also the nation that has borrowed the fastest in the last three years. Data from the Economic Commission for Latin America and the Caribbean (ECLAC) presented a few days ago show that the proportion of Argentina's public debt rose from 53.3% of GDP to the end of 2015 to 77.4% mid-2018, while the regional average has arrived 41% in the same period.

The book entitled "Preliminary Overview of the Economies of Latin America and the Caribbean" highlights the case of Argentina, which has increased their level of indebtedness 20 percentage points of GDP between 2017 and the second quarter of 2018.

However, this report from the Latin American agency only takes into account the first disbursement of the International Monetary Fund (IMF) in the first half of last year. With which, if we consider the latest official data, which correspond to the third quarter of 2018, the Argentine debt reaches 95.4% of GDP. "And if you add it last installment of the Fund, the estimate reaches 97.7% "says economist Guido Lorenzo from LCG consulting firm.

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The badyst notes that "other countries have external debt levels relative to reserves, for example, very low compared to our country." In Argentina, despite the recomposition, the ratio of debt to international reserves has doubled in the last five years "said.

According to ECLAC report, Argentina is late Brazil, with a level of public debt of 77.2% GDP until the second quarter of 2018. Costa Rica ranked third with the 52% of your GDP.

Paraguay, meanwhile he presented the lowest public debt in the region, equivalent to a 16.2% GDP. At the same time, that of Peru rose to 20.4% and that of Chile to 23.7%.

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Lorenzo explains that in Argentina, debt has a particularity that 75% is in foreign currency"He says." This leads us to think if we can really afford it. Some countries do not have this difficulty, they issue debts in national currency and at rates similar to those of their product, so that sustainability is not a problem, "he said.

In the increase of the Argentine debt, different factors have influenced. On the one hand, the agreement reached between the country and the IMF to access the loan of 56.3 billion US dollars. Losses due to drought in 2018 (with an export estimated at USD 8,000) and the fall in the international price of soybeans, among others.

"The sharp increase in debt in 2018 is mainly due to the effects of the devaluation the peso, which has lowered GDP in dollars, and therefore "strongly" increased, "says Marcelo Capello, director of IERAL." It is obvious when we consider the debt in dollars, it went from 321 billion USD in 2017 to 308 billion USD at the end of September 2018, but the debt-to-GDP ratio has increased from 57% to 95%. "

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However, according to Capello, "the debt to which we must pay more attention is that of which the creditor is not the same Argentine public sector, but the debt towards private and international organizations". Thus, the public debt rose from 29% of GDP in 2017 to 58% in 2018, a significant increase, but which puts the level of debt to tolerable levels, "he said.

The ECLAC report adds on local indebtedness that "Argentina is committed to implementing a difficult tax adjustment to achieve a balanced budget balance for 2019"Therefore, the key is what happens with the budget deficit.According to Capello," the financial requirements for 2019 are covered, but not for 2020. And in the middle are the presidential elections, which are the main source of funding. uncertainty about the future debt situation, "he said.