Informe Mensual Económico Financiero N° 346 – Diciembre de 2018
The G20 meeting in Buenos Aires, with which the group´s Argentine presidency
ended, was successful in organizational terms and in reaching consensus for a
common communiqué (except for environmental topic) which includes important
issues such as the redefinition of the WTO and the need to capitalize the IFIs.
In paralell, the signing of the new NAFTA, the truce in the tariff war between
China and the US, are relevant facts. And for Argentina, important bilateral
agreements in terms of trade and investments.
In the USA there is a deceleration in the rate of convergence of the nominal
interest rate with the rate (also nominal) of economy´s growth; when the rate of
growth increases, the interest rate accompanies with a certain lag; in the current
cycle , the response is slower than expected.
Despite years of low growth and high debt index levels (88% of GDP) and a high
fiscal deficit (8.6% of GDP), Brazil´s country risk remains relatively low (250 to
300 basic points), with a SELIC rate also low. Key to this are price stability
(inflation between 3.5% and 5% per annum), the high proportion in national
currency of total debt and, above all, the existence of a solid capital market with
a strong presence of institutional investors, which does not exist in Argentina.
In Argentina the CPI for November would show a slowdown that the October
IPIM anticipated; an increase of 3% is estimated. However, there is a pending
“pass through” that , together with the adjustments of public services , taxes and
various private services (prepayments, education, insurance, tourism) suggest
a resistance of a continuation of the downtrend. Note: the closing of the fiscal
accounts in 2019 requires an “inflationary tax” higher than that foreseen in the
Agreement with the IMF.
Economic activity in the third quarter fell with respect to the second, although at
a more moderate pace than in the second quarter. There is a large dispersion in
the behaviour of the different sectors: some with greater activity than in the same
period of 2017 (agriculture, mining and some services) and others with
significant declines (industry, commerce, transport). Even sectors that have
grown in volume may have problems of profitability; those sectors are not labor
intensive and have more impact in the provinces than in the GBA.
The fiscal situation is heading towards fulfilling the goal agreed with the IMF. The
primary deficit in October was16.6 thousand million pesos and in the first 10
months it rises to 169.9 thousand million. In October, resources grew 38.5% and
primary expenditure 30.4% compared to the same month in 2017. The keys to
increasing revenues are the acceleration of the inflation rate, the withholdings to