MercoPress. South Atlantic News Agency

Argentine economy “cooling”

Even when the Argentine economy shows a strong expansion compared to a year ago the latest official economic data release indicate that activity is slowing down particularly in the industrial sector.

"Economic activity in June increased 8,2% over a year ago, but remained stable compared to May 2003", according to the official Argentine Statistics Institute monthly economic activity estimate released this week. This means that the Argentine economy during the first half of 2003 accumulated a 6,5% expansion over the same period in 2002.

However 2002 is associated to the worst economic year in recent history when Argentina defaulted and the economy contracted 11,7%.

"Industry overall has suffered most: with an exchange rate of 2,80 pesos to the US dollar, exports and import substitution are rather disoriented, and this has reflected in the whole economy", said economist Orlando Ferreres.

The June monthly economic activity estimate precedes the official publication of the quarterly evolution of the Argentine economy.

Mr. Ferreres also revealed that the primary growth figure for last July actually indicates a slight contraction, "which means the economy is cooling down".

"At the beginning of the year the economy was expanding over 1% monthly, but last May and June it dropped to 0,3% and 0,4%, and the July forecast is a contraction".

Mr. Ferreres further indicated that financial markets are still edgy about the long term agreement Argentina is discussing with the International Monetary Fund.

"Political differences have been overcome, technical differences must be addressed, and these should be easier to sort out a deal with the IMF", said Mr. Ferreres.

However Mr. Ferreres also pointed out that Argentina still has ahead the defaulted debt negotiation and talking about "creating a club not to pay and forming an anti Free Trade of the Americas Association; FTAA, group", doesn't help.

"Although we know that President Kirchner does not share these ideas the fact that (visiting) Venezuelan president is openly preaching them in Buenos Aires means a lot of negative press for Argentina".