MercoPress. South Atlantic News Agency

Argentine private sector recommends close monitoring of Brazilian indicators

Watch out for Brazil’s fiscal deficit and a revaluated Real

According to Argentina’s Finance Executives' Institute (IAEF) May report the country’s economy experienced an expansive boost during this year's first four months, thus somehow dodging the European and Euro crisis triggered by the Greek situation which could extend to the so called PIGS (Portugal, Ireland, Greece and Spain).

Industrial production growth of 10.2% during the first quarter, consumption dynamism and the increase on the farming exports are indicated in the report as the main factors that contributed for the economy's expansion, although there are some warnings.

The report remarks that to keep the good numbers, Argentina should keep a close eye on foreign capitals and ensure they don't leave for which it recommends the promotion of long-term foreign investments. IAEF also advises to cash out the trade surplus so that it can be oriented to production mainly, without generating any inflationary tensions.

When it comes down to Latin America, the report expects Brazil to grow between 5.2 and 6.2% in 2010, but warns that four categories of Argentina’s main trade partner must be monitored: an inflation rate that sets on top of those from the developed countries; a high current account's deficit (3.3% of GDP); a high fiscal deficit for a growing economy like the Brazilian and a revaluated currency.

About the European crisis, the monthly report considers that “the situation has been worsening due to the absence of institutional crisis solution and distribution costs mechanisms.”

The report also points out to the lack of previous experience the countries affected show in terms of working together to placate crisis such as the current one. Thus, the IAEF celebrates the announcement of the rescue plan.

Regarding the US, the report underlined the recovery of its economy, “It seems more intense than what was expected and good to the point that it has already reached the levels prior to the 2008 financial crack”.