This ongoing newsletter includes eight publications:
Analysing Weekly Real Economic Indicators in Argentina: Every Monday
Released every Monday, the Report brings to you concise commentary and analysis of macroeconomic data released during the previous week. Information reviewed is both backward and forward-looking and covers both developments in the real economy and the dynamics of prices. The list of indicators is wide and includes: headline and wholesale inflation, inflation expectations, consumer confidence, shopping centre and supermarket sales, car and motorcycle registrations, public services utilisation, leading indicators of economic activity, manufacture production, motor vehicle production, capacity utilisation, construction activity and costs, formal employment and salaries, and the trade balance, among others. Data are classified employing a traffic-light status indicator (green, yellow and read) according to the improvement or deterioration of the respective variable. A highlight of each data release is presented together with the main driving forces. Altogether, the report gives you a snapshot of Argentina’s latest macroeconomic developments in a concise, intuitive and easy to follow manner. A must-have to be updated with the latest real economic activity developments in the country.
Tracking Foreign Exchange Rate Pressure in Argentina: 1st week of the month
Released the first week of the month, the Report monitors graphically the behaviour of selected economic variables that have been powerful predictors of tensions in Argentina’s foreign exchange rate market. For decades, the country has exhibited recurrent shortages of foreign exchange currency, which end-up manifesting themselves in balance of payments deficits. These deficits translate initially into loss of international reserves, leading sometimes to large adjustment in exchange rates. Currency tensions are usually accompanied by portfolio dollarization and capital flight that aggravate the balance of payment crisis, generating runs against the local currency that culminate in financial crises and destabilize the national economy. Against this background, the Report analyses selected variables that help to characterise tensions in the foreign exchange market in Argentina. The main variables selected for monitoring are the following: bank deposits in domestic and foreign currency, exchange rates of the Argentinean peso (official exchange rate, blue and blue chip swap), foreign currency settlement, commodity prices, capital outflows and net international reserves. For each variable, we present a chart summarising its recent evolution together with a short commentary and analysis. Being up-to-date on evolving developments and emerging tensions in Argentina’s foreign exchange rate market is important to make decisions on M&As, foreign trade and flows of dividends and profits between your local operations and the overseas headquarters. If you have operations in Argentina or are planning to do business with the country, this report will help you to make better informed decisions now.
Following Argentina's Labour Market Developments and Policies: 1st/2nd week of the month
Released between the first and second week of the month, the Report reviews the latest labour market trends in Argentina. As other developing countries in the world, Argentina is suffering an unprecedented economic and social crisis due to the Covid-19 pandemic, which is heavily impacting the labour market. Employment and hours worked have fallen sharply and the quality of work has deteriorated. Taken together, these dynamics have resulted in a decline in labour and household income. Lower income workers are suffering the most, which will result in an increase in income inequality and poverty, reverting progress made in previous years. In this context, the Report reviews recent dynamics in wages and employment, including a breakdown per branch, sector and geographical region and it also assesses labour market prospects. Importantly, it reviews the measures that have been agreed among major stakeholders (government, labour unions and employers) and are being implemented to prevent further job losses. Given the larger share of middle income segments in total income in the country compared with other Latin American countries, following employment dynamics in Argentina is important to assess the evolution of people’s consumption power during the Covid-19 crisis and beyond.
Monitoring Inflation Dynamics in Argentina: 2nd/3rd week of the month
Released in the second or third week of the month, the Report analyses recent inflation dynamics and forecasts in Argentina. The country has a long-standing history with inflationary issues. Inflation has often been double digit since the country became independent from Spain in 1816 but it had declined to single digits in the 1990s amid a currency board. Inflation returned when the currency was allowed to float in the early-to-mid 2000s and the country exhibited double digit inflation again since 2015 and likely before (although official data are lacking for part of the 2000s). High and volatile inflation may hinder the economy. Business confidence and investment may be impaired as it makes it difficult for agents to project costs and income, altering the expected return of an investment. Inflation also leads to higher dispersion of prices among economic sectors and items, leading to volatility in relative prices. Savings may be deterred, encouraging agents to protect themselves via portfolio dollarization and the purchase of durable goods, among others. Moreover, when inflation accelerates, it can lead to a decline of international competitiveness, which is detrimental particularly for manufacture exports. In this regard, the Report analyses medium-to-short term inflation dynamics in Argentina, covering the evolution per component (seasonal, core and regulated) and item (transport, communication, education, etc.). It also disentangles the main drivers of inflation (public support programmes, impact of the Covid-19 pandemic across sectors, etc.) and presents inflation forecasts by analysts as reviewed in Central Bank surveys. Keeping abreast of the latest developments regarding inflation will help you to optimise your business decisions in Argentina.
Reviewing Argentina's Fiscal Stance: 3rd/4th week of the month
Released in the third or fourth week of the month, the Report reviews the latest fiscal outturn in Argentina. The country has had chronical fiscal deficits for decades, with the exception of part of the 1990s and from 2003-2008, when it recorded a primary surplus. The first of the two periods mentioned is the initial recovery in economic activity associated with structural reforms after the poor economic performance of the 1980s and the two hyperinflations of 1989-90. The second one was related to the boom in commodity prices, which was associated with an unprecedented increase in economic activity, tax revenue and fiscal spending. Outside these extraordinary periods, Argentina has had a hard time to keep its fiscal accounts in balance. As such, the Report reviews the latest headline result and its breakdown (total tax revenue, primary expenses and interest payments). It also discusses their main driving factors in terms of changes in government spending items and the collection of specific taxes (VAT, income tax, social contributions, etc.). Importantly, the Report highlights changes in fiscal policy, such as those associated with the need to support the economy during the Covid-19 pandemic and in tax policy to boost revenue collection. Once per year, a discussion is also included on the budget bill, highlighting the main changes with respect to the previous year (areas where stimulus measures are withdrawn or expanded, revenue raising measures, etc.), assessing the assumptions underlying the macroeconomic projections employed in the bill and discussing options to close the financing gap. Finally, the report also presents a projection of the fiscal outturn for the year. Irrespective of your business line, this report is an essential tool to assess the repayment capacity of the government, to understand the outlook for inflation and economic activity, and to predict bond and equity valuations.
Assessing Monetary and Financial Developments in Argentina: 1st week of the month
Released in the first week of the month, the Report assesses monetary and financial developments in Argentina. There is no doubt that country has had an uneven economic performance. Since the country returned to Democracy in 1983, the Central Bank of Argentina has had 24 Presidents (approximately one President every one and a half year). At the same time, thirteen zeros had been removed from its currency between 1969 and 2020, amid instability in the domestic currency and high inflation. The country implemented several monetary policy and exchange rate frameworks (ranging from strict currency pegs to freely floating, inflation targeting, etc.) and defaulted and restructured its debt four times over the same period. Keeping that in mind, the Report reviews the key latest developments in the monetary and financial field, including the debt renegotiations with private debtors and international institutions, trends in foreign exchange rates and gaps of the Argentinean peso, real exchange rate dynamics and the most recent Central Bank policies (monetary financing and sterilisation, exchange rate policies, etc.). In such an environment, local expertise is essential to understand developments and to exploit business and trading opportunities.
Taking stock of Argentina's Foreign Trade and Policies: 4th week of the month
Released in the fourth week of the month, the Report assesses the latest developments in Argentina’s foreign trade. The country is top 10 worldwide in terms of surface and it has exceptional climate diversity. Benefiting from rich natural resources, it has a well-diversified industrial base and an active export-oriented agricultural sector. As such, it is not surprising that around 70% of Argentina’s exports are agricultural products and manufactures of agricultural origin. Most of the exports are directed to Brazil, which has been traditionally Argentina’s most important trading partner. While trade with China was negligible until the early 1990s, it has been growing fast to become Argentina's second largest trading partner by the end of the first decade of the 2000s. Other major trading partners are the United States and the European Union, with which a free trade treaty has been signed together with other Mercosur members in the middle of 2019. With this in mind, the Report describes the evolution of Argentina’s foreign trade by category of imports (capital goods, intermediate goods, consumer goods, etc.) and exports (primary products, manufactures, fuels, etc.), distinguishing between prices and quantities. It also analyses trade flows at the country level, identifying changes in the ranking of the main trading partners and discussing the main driving factors behind those changes (trade treaty between the US and China, impact of the new treaty with the EU, changes in competitiveness across countries, etc.). Last but not least, the Report discusses the impact of domestic policies in shaping foreign trade (quantitative restrictions to imports, multiple exchange rates, etc.). Understanding developments in foreign trade in one of the largest food producers is important because food drives the world and adequate food supply is of primary concern for most people on earth.
Gauging Argentina's Industrial production, Construction and Economic Activity: 1st/2nd week of the month
Released between the first and second week of the month, the Report assesses the recent performance of Argentina’s overall economic activity, industrial production and construction. Benefiting from the commodity price boom, Argentina’s Gross Domestic Product (GDP) - measured in constant US dollars - doubled since the aftermaths of the crisis in 2002 and while it lost positions against Chile and Uruguay during the last few years, Argentina still enjoys the third highest per capital GDP in Latina America. In nominal GDP terms (in US dollars), the country is the third-largest in Latin America and the second largest in South America (after Brazil). In spite of the growth of the agricultural sector over the last twenty years, the country benefits from a considerable internal market size. Moreover, the country has had historically a high rating on the Human Development Index (ranking 48th worldwide in 2019) and the high-tech sector has been growing fast. Construction is another sector that boomed since the crisis in 2002 and has seen a growing presence of overseas investors. Against this background, the Report assesses the latest developments in terms of economic, industrial and construction activity. For economic and industrial activity, it looks at the evolution of the main constituent sub-sectors (textiles, machinery, food, etc.) and also at retail trade (home appliances, pharmaceutics, footwear, etc.). For construction, it looks at overall developments and construction input (cement, iron and steel, etc.), as well as the outlook for the sector and the main driving forces. For all these sectors, the Report presents the main economic drivers of the latest dynamics and discusses policies directed towards boosting economic activity. Market forecasts for economic activity are also presented and revised. The Report is a must-have to follow the pulse of the Argentinean economy.
a. Commentary and analysis of the data released, including relevant breakdowns.
b. Discussion of the main driving factors.
c. Review of the latest policies shaping the sector.
d. Forward-looking assessment and forecast for the sector under consideration.