MercoPress. South Atlantic News Agency

Political turmoil causes 9 billion USD to flee Argentina

An estimated 9 billion US dollars left Argentina between late March and the end of June on fears of growing uncertainties about the country's economy and the on going stand off with farmers who are protesting President Cristina Fernandez de Kirchner administration policies towards the camp.

Although the sum is not official but rather estimates from corporate economic advisors in Buenos Aires, the farmers conflict only confirmed the "inflation and energy" concerns which surfaced in early 2007 but intensified with the government's frenzy spending in support of the electoral campaign of Mrs. Kirchner who last December received the presidential sash from her husband, former president Nestor Kirchner and now secretary general of the ruling Justicialista Party. Argentina which has a long history of unstable economic performance attracting and expelling capital with similar intensity, has taught Argentines to hold reserves and assets overseas. According to official Central Bank statistics Argentines hold private non financial assets equivalent to 114.3 billion US dollars overseas which is half the country's GDP of 280 billion. However this does not contemplate non declared assets or other financial resources which can be moved out of the country, so private sector estimates (and even from government officials) tend to double that figure arguing that there's a parallel Argentine GDP overseas. The 9 billion US dollars which allegedly left Argentina has been reached by checking sales of foreign currency in money exchange houses, "which has been particularly active in the last few months", with an excess demand of 2 billion US dollars in April and May according to economic advisors Broda. The loss was comfortably covered with the Argentine Central Bank reserves that stand in the range of 50 billion and which showed in non updated statistics a loss of 3 billion US dollars beginning mid March. Economic advisors Massot/Monteverde & associates point out that if Central Bank numbers are closely scrutinized, "there's a hike in credits contracted with international organizations" in the range of 1.5 to 2.8 billion US dollars, mostly from the Bank for International Settlements in Basle, which helps to overshadow any possible drop in reserves. So the actual drop in Central Bank international reserves "is closer to four billion US dollars". Apparently the Argentine central bank resorted to a similar action in mid 2007 when the US subprime crisis emerged with full force causing a major upheaval in global financial markets. Monteverde adds that growing misbalances in the Argentine economy and an overall unfriendly business atmosphere are helping to promote the exit of capital, which is hard to see, in current circumstances, slowing down. Another economic advisors office Bein & associates puts the April/June loss in 8 billion US dollars, a sum reached after checking Central Bank hard currency trade during the period and the difference between grain and oilseed exports value and what should have been collected in a normal situation with no farmers' conflict. "Grain and oilseed exports overseas in the second quarter were 30% higher than in the same period a year ago, but 40% below what was expected because of the planned increase in volume and particularly high prices for the commodities", said economist Federico Smeniuk from Bein advisors. Furthermore Broda says that converting assets into US dollars was in the range of 7.5 to 8 billion US dollars in April, May, "so in just two months the loss of capital in Argentina was almost equivalent to the whole of 2007 with 8.6 billion US dollars". The only time a loss of greater magnitude registered in recent history was back in 2001 from the third quarter to the second quarter of 2002 when money fleeing reached 18.7 billion US dollars, causing the implosion of the ten year convertibility system of one US dollar equivalent to one Argentine peso and the melting of the country's economy.