By Jorge Reano
On Tuesday, the Argentine Peso depreciated more than 5% against the US Dollar, within an international context where there is strong pressure over the currencies of emerging economies.
Argentina has been unable to fight against the US Dollar and thus, it has been forced to once again request a bail-out from the IMF after 15 years.
In a taped message to the nation, President Mauricio Macri stated: “We are one of the countries which need international financing due to the huge public expense which we inherited [from previous governments]”
Answering Mr. Macri’s statement, Christine Lagarde, the Managing Director for the IMF said: “I very much welcome President Macri’s statement and look forward to our continuing partnership with Argentina.” She also added: “Discussions have been initiated on how we can work together to strengthen the Argentine economy and these will be pursued in short order.”
Christinge Lagarde and Argentina’s President Mauricio Macri
Because of previous “entanglements” the IMF is not very popular in Argentina as it is known the Fund will set stringent conditions in order to facilitate the credit which Argentina so desperately needs. And those conditions will certainly become painful and extremely unpopular.
As Mark Weisbrot, the co-Director of the Center for Economic and Policy Research think-tank in Washington DC states, regarding the Line of Credit Argentina may get: “…it depends on what conditions the IMF puts on it. The most likely direction will be to reduce the current account deficit through contracting the economy, which is of course not good for the majority of Argentines. The IMF of course has a terrible history in Argentina, in particular their role in deepening and prolonging the depression of 1998-2001.”
Argentina has then to push for new industries or to strengthen those which are carrying the economy. One of these is –definitely- Global Trade. Soy Beans have become an industry with an ample International Market appeal, especially now that the US is looking to implement tariffs, thus making the cheaper and high-quality Argentine Soy Bean as a very important alternative, principally for the Asian (mainly China) and European Markets.
A well designed and revived Trade policy, added to the IMF’s Line of Credit, could help Argentina re-structure its economy, once again.