They detect the three aspects of the vulnerability of the Argentine economy

The private badysis allowed Argentina to deplore the lack of macroeconomic stability due to the trade war between Donald Trump and his Chinese couple Xi Jinping, the increase in the interest rate in the United States and the increase in production costs due to the increase in the exchange rate.

Interest rate

The vulnerability is exposed to the increase in debt, with the LIBOR rate increasing. "The problem stems mainly from the fact that, in an international context of rising interest rates, the national government has decided to increase debt through a loan with the IMF"he underlined the report to which he subscribed domain.com.

Interest Rates Ficonomics I.jpg

Ficonomie

If one takes into account the gross debt structure of the central government of the country, the 31.5% it is capitalized at a variable rate, he recalled the academic work. Therefore, an increase in international interest rates would generate a "serious problem" when badessing the sustainability of the country's debt. "This translates into an increased tax effort to pay for it, taking into account that most of it is in foreign currency ", they said.

Devaluation

But the rise in interest generates other benefits and difficulties. "This can improve the competitiveness of international trade, ie export a higher price, which would lead to an increase in exports, but a decrease in imports," the consultant said. And they added, "The country has shown that exports have a low exchange rate elasticity, and a trade surplus of $ 1,183 million was achieved in March, but to the detriment of lower imports (-33.7% in one year) to a greater extent than exports (-5.0% in one year). ".

Pbad through

As if that were not enough, the devaluation brings another disadvantage to the Argentine economy: the transfer of the dollar's change in prices, which leads to an increase in internal costs. "The real economy in the country is recessive in the face of rising exchange rates, generating higher inflation," he said.

Commercial War

Another factor that conditions the country is that the world is becoming more restrictive. The offer between the United States and China proves it. "The imposition of tariffs suggests that the major powers are increasingly protectionist," the report continues: "What worries the countries that depend on their trade with them." Argentina does not is no exception to the rule since two of the three largest trading partners are the countries mentioned. "

Ficonomics Exchange Rate.jpg

Ficonomie

According to Ficonomics, the movements of money observed in recent weeks in Latin American countries have been caused in part by the tensions between these two powers.

Country Risk

The index oscillating around 960 points, the fear grows that Argentina can not pay its commitments, increasing the capital flight. "One of the main consequences of increased country risk is the growing mistrust of international markets, which could in turn lead to the flight of local market bondholders to a more competitive market. reliable, "warned the badysis. To avoid it, the consultant

The fragility

For experts, the country's weakness is demonstrated by the "terrible" consequences of external vulnerability to the local economy. "The probability of debt default is reinforced by current macroeconomic conditions, both globally and locally," they claimed.

In this regard, they felt that the impact that Argentina could suffer from a further increase in the international interest rate would be "too important" given the fragility of the market. local. "An exit from bonds would be complicated to manage, adding the recessive context we are in. If, in addition, it is estimated that almost 80% of the debt is in foreign currency, the picture becomes even more complex," he said. they warned.

Ficonomics Riresgo Country.jpg

Ficonomie

Similarly, they fear that external shocks will affect the exchange rate, and that this difference will be transferred to prices, leading to an increase in the cost of living and production, which will reduce economic activity. "The Argentine economy has become a difficult variable to predict further in an international context that is not favorable to us and where trust has been lost some time ago," they concluded.