Monthly Report - October 2009 (pdf) .
"2010: No Fiscal Surplus
or Debt Problems"
By Ramiro Castiñeira
.
No room for Lehman Brother and other active policies that led the Fed to double the monetary base, and the Treasury to increase the public debt from 65 to 90% of GDP, the fact is that managed the expectations of the markets not only leave behind the worst scenarios that could arise from the international financial crisis, but even now expects a strong rebound in U.S. economy by 2010. This scenario not only consolidated but extends to the world as reflected in the IMF's own projections.
Argentina, the IMF would have fallen by 2.5% in 2009 due to the impact of the external crisis itself, but also by internal factors that fostered effect. Among them, a smaller crop due to weather, and a large outflow of private capital at the macroeconomic deterioration in general but of particular tax result, which questioned the ability to pay its debt to the lack of access to credit and which resulted in the nationalization of the administrators.
However, in line with the rest of the world the level of local economic activity stopped falling for the second quarter of this year and even the local financial assets also began to cut losses.
This scenario took more strength in the third quarter of the year when the government began to show "ready" to restore relations with the IMF, in addition to resume negotiations defaulted debt with the Paris Club and with the holdouts.
Best external environment and the possibility of Argentina's return to debt markets underlie the shift in expectations on the local macroeconomics, which resulted in a major disincentive to private capital outflow in recent months.
However, this bias that shows the government to regain access to markets respond to fiscal weakness is the striking feature also 2010. If it fails to cast doubt on the ability and willingness to pay government debt next year, the truth is that sustainability is lost longer term and independence of the markets that gave the bulky primary surplus.
Access to credit would not only avoid the need for fiscal adjustment and / or abuse of the tax to inflation, but also have financial back beyond 2010.
In sum, this report will attempt to trace the economic scenario of 2010, taking as input an external environment that focuses on the end (or break) of the international financial crisis. To do this, first examine the external front to estimate the supply of dollars into the economy in anticipation of a good harvest in 2010, before going on fiscal front, with emphasis on the profile maturity of public debt and its financing sources. Also contemplate the fiscal impact of a possible renegotiation of the debt in default.
