Argentina’s financial crisis will ease with a new harvest starting in November

The reserve crisis that led to high exchange rate volatility and higher inflation in Argentina it will begin to recede between November and December, when the new harvest allows for a large inflow of foreign currency, Cabinet chief Agustín Rossi told Reuters on Friday.

The country is going through a prolonged financial crisis that this year was aggravated by a ferocious drought that, according to estimates, reduced exports from the agricultural sector – the country’s most thriving industry – by about US$ 20 billion.

In the midst of tense negotiations with the International Monetary Fund (IMF) to obtain financial aid, the official who is also a vice-presidential candidate for the October elections pointed out that Argentina should not devalue the currency to stop inflation.

“This situation ends in November, December this year”, Rossi highlighted in an interview with Reuters.

Argentina accumulated inflation of 115.6% in the last 12 months and its poverty level reached 39.2% of the population, which has triggered deep concern in the ruling Peronism, which intends to win the October elections with the formula headed by the Minister of Economy, Sergio Massa, and seconded by Rossi.

“Next year you will not have a drought, you will have savings of US$ 4,000 million because you will have the first stage of the Néstor Kirchner gas pipeline running (which transports unconventional gas from the Vaca Muerta formation).”, added the chief of staff in his office at the Casa Rosada.

“This will allow a favorable trade balance and recover reserves, and have a more controlled view of exchange rate movements. This lowers inflation immediately and recovers the purchasing power of the salary”, he added.

The Government maintains restricted access to foreign currency to prevent further draining of reserves from the central bank, which suffers daily to maintain the peso’s price.

However, Rossi stated that a further devaluation of the Argentine currency would only cause more difficulties.

The inflation “it is not lowered with abrupt devaluation (…) We do not believe that this is necessary in Argentinathe official said.

The center-left management aspires to close in the coming days the renegotiation of an agreement for US$ 44,000 million with the IMF, which would allow it to receive fresh money to cancel maturities with the organization before the presidential primaries in August.

“What we are carrying out is a negotiation that defends the interests of the Argentine people and the Fund has negotiators who defend the interests of their leaders, who are the countries that make up the Fund (…) We are optimistic, we believe that we will find a wayRossi pointed out.

Although various polls show the center-right opposition to be in a better position for the October elections, analysts expect a close election that, to a large extent, will be defined by the evolution of the country’s delicate economic situation.

The pro-government coalition – called Unión por la Patria – experienced deep short-circuits between its factions during its four years in office, which the Cabinet chief considered would not be repeated in a future government due to the broad internal consensus achieved by its candidates.

“We have a good synergy at this stage. Peronism as a whole is working in a certain direction, there is no important political sector of Peronism that has not claimed the (presidential) formula of synthesis. All the actors feel represented”, he concluded.

Source: Reuters