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Informe Mensual Económico Financiero N° 338 – Abril de 2018

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EXECUTIVE SUMMARY

In a context of a long period of global economic and trade growth (4.5% per annum

in 2017) protectionist measures in the US make electoral rhetoric a reality.

Protectionism is neither positive for the majority of the countries that applies it

(except for the protected sectors) that will see an increase in internal costs, nor for

trade in general. In addition, it implies moving from a commercial order based on

the rules of the WTO to discretion, raising unpredictability and uncertainty.

In particular, the risk of retaliation by above all, by China, the country that owns 1.17

billion dollars in US Treasury bonds (8% of the US public debt), increases the

danger of spreading retaliation to the financial field, with risk for countries that

demand financing for their fiscal deficits and/or Current Account of Balance of

Payments, such as Argentina.

The G20 has been successful as a fireman in the face of crisis of various kinds,

despite not having concrete empowerment. The balance of the meeting of the

Finance Ministers held in Buenos Aires was positive in terms of the emphasis of the

relevance of free trade (in contrast to US measures), capital movements and

technology transfers.

The stock of public debt issued by emerging countries doubles in 2018 the level of

2011; for 2018, a gross issuance of 153.0 million dollars is estimated, equivalent to

15% of the stock and somewhat less than what was placed in 2017.

Argentina has a high participation in the ranking of emerging debt placed via

sovereign bonds and in the issuances made in the last five years (first and third

place, respectively). This is a risk factor in case of a potential sudden stop in capital

flows.

Argentina’s public debt at the end of 2017 according to the IMF is 54% of GDP,

26% corresponding to debt with non-residents (external public debt) and 28%

corresponding to debt with residents (internal public debt). This composition

contradicts the principle that the debt taken with non-residents must be

complementary to the debt taken in the domestic market, which is attributable to the

small size of the latter and the low national savings rate. As it is an important factor

of vulnerability, the government has decided to withdraw from the international

market and prioritize direct placement in local banks and the use of Letes (Treasury

notes).