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A strange cocktail: economic recession plus fiscal adjustment

2024-02-10T22:33:22.027Z

Highlights: Argentina's industry faces difficulties in accessing foreign currency, paying suppliers and internal demand that contracts year after year. Textiles, leather and footwear, followed by cars and tires and then, chemicals and petrochemicals. Among the hardest hit regions, the City of Buenos Aires leads the pack; behind them are the Buenos Aires suburbs, Mendoza and San Luis. There is no chapter on the industrial horizon to be excited about, according to the latest survey carried out by INDEC among businessmen.


Beyond the classic adjustment that the Government implements today, the industry faces difficulties in accessing foreign currency, paying suppliers and internal demand that contracts year after year.


If the measure is the INDEC manufacturing production index, the conclusion suggests that 2023 was the worst year for the national industry in almost a decade.

And if you prefer another way of looking at the same thing, we have that only one month in 2019 and three in 2020 recorded records lower than the average drop of 12.8% in December 2023, that is, a very modest four months above the 96 that have passed since 2016 and a resounding triumph of the downturn.

December 2023, that is, the closing of the last Kirchnerist cycle, ultimately resulted in a conglomerate of factory activities in deep red, much of it with figures below zero or well below zero compared to December 2022. Among them,

50 .7% in agricultural machinery;

32.6% of the steel industry;

31.9% in electrical equipment and appliances and 25.4% for base metals.

Not even Argentina's advanced

food and beverage

production in many ways was saved from the shock.

Driven by the 11.7% hit to beef and the 23.3% hit to oilseed grinding,

the result has been down by 7.8% and for seven consecutive months

within a complete picture that reveals levels similar to those of October 2020, in the middle of the pandemic.

There is nothing behind such data that is not perceived or can be considered outside the script.

According to INDEC explanations, there is a mix of

difficulties in accessing imported inputs, that is, endless stocks and scarce dollars and, then, payment problems to suppliers and obviously a drop in internal demand.

The point is that we are talking about nothing less than an

industrial decline that has long been established in Argentina

, which is the same as continuing to miss the train of development and progress and continuing to live with low-quality, unstable and unproductive jobs and with increasing salaries. deteriorated.

A strong fact of the problem: informal employment, without labor or social coverage and without the support of joint negotiations, already reaches around 47% of existing employment throughout the country, as much as white work.

Another of the same type taken from UIA reports says that, between October 2013 and October 2023, no less than 68,573 formal jobs, blank and in order, were lost in the industry, compared to the million 300 thousand that were had reached the peak of activity.

And which sectors suffered and are suffering from the sack?: first by far, textiles, leather and footwear, followed by cars and tires and then, chemicals and petrochemicals.

Among the hardest hit regions, the City of Buenos Aires leads the pack;

Behind them are the Buenos Aires suburbs, Mendoza and San Luis.

And how does the movie continue?

In the short term, there is no chapter on the industrial horizon to be excited about, according to the latest survey carried out by INDEC among businessmen in the sector.

Regarding internal demand,

49.4% responded that it will decrease and 37.4% that it will not change, that is, that it will continue to be depressed.

Regarding exports, 23.8% will decrease and almost 60% without changes.

Completely predictable, 82.3% of employers do not plan to hire staff and 67% rule out increasing working hours.

Just so that the pessimism does not subside, now the construction statistics.

In fact, they show figures identical or almost identical to those of industrial production: a drop of 12.2% in December 2023, the largest since May 2020, in the middle of the pandemic, and 9 drops in the 12 months of last year.

There are also no differences with the industry regarding short-term business expectations.

93.9% of those dedicated to private works believe that the activity will continue on a slope or the same as until now.

Among those in public works the count shows 97.2%.

And the projections on employment and hours worked are along the same lines and highlight a general coincidence: there is nothing in sight that sounds like a bet on reactivation.

There are responses that focus on the general uncertainty, the tax pressure, the delay in State payments and, in fact, the lack of an anti-inflationary policy that appears effective from a concrete point of view.

It becomes clear, therefore, what has been very clear for a long time: that the Government will have to deal with an economy full of problems that would not have been of its own making, this is what it has to face and for which it should have been equipped.

The Monetary Fund has already planned a decline of 2.8% for this year, after the 1.1% of the same sign that it would have registered in 2023

.

According to the latest survey that the Central Bank carried out with specialists from here and abroad, GDP would fall by 3% and almost all of it concentrated in the first quarter.

In case it needs to be clarified, the numbers go on and on.

Of course, some are a little scared due to their magnitude.

This is the case of retail sales surveyed by CAME, an entity that represents small and medium-sized companies throughout the country.

The data for January versus January of last year show an average drop of 28.5%;

They continue with 31.3% for electrical and construction materials, with 37.1% in food and beverages and jump to 45.8% in pharmacy products, that is, nothing less than remedies.

Back to inflation and the Central Bank survey, we have that only in July will the price index return to the single digit zone: 8%, says the BCRA report.

The January number is a still spicy 21.9% and the one for the entire year is even more spicy: 227% or almost 16 percentage points above the 211.4% in 2023.

The picture speaks of stagnation with large-scale inflation, which is also known as stagflation, it puts noise where there is excess noise, spreads uncertainties and hits the most vulnerable social sectors.

He also raises an inevitable question: if all this was already in sight, why didn't Javier Milei arrive with a team and an armed plan that would attack stagnation and inflation from the start?

It is difficult to find something similar to that in

Luis Caputo's speech and, on the other hand, there are many commitments with the goal of quickly achieving balance in public accounts

and ending the inflationary financing of the Central Bank, that is, in-depth fiscal adjustment, in the manner of the commitments with the Fund and in line with what the markets ask for.

This is, finally, the world of money.

By the way, where in Caputo's recipe does Milei's take on provincial subsidies for public transportation that goes directly to passengers, usually with low incomes and unstable jobs, come into play?

Nothing new,

a very classic fit.

Source: clarin

All business articles on 2024-02-10

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