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Argentina needs ‘no contingency or emergency plan’ to face the crises

Monday, August 22nd 2011 - 07:01 UTC
Full article 3 comments
Minister Amado Boudou confident the Argentine economy can weather external shocks Minister Amado Boudou confident the Argentine economy can weather external shocks

Economy Minister Amado Boudou rejected the possibility that Argentina launches a brusque devaluation of its currency to make exports more competitive and insisted Argentina needs no emergency or contingency plan to face the challenge of the current crisis in the developed economies.

“There will be no brusque jumps anywhere, regarding Argentina’s exchange rate, we will continue to manage foreign exchange as we have done successfully” stressed President Cristina Fernández de Kirchner running mate for the October president and legislative elections.

“No policy change in the matter until October, or following October”, said Boudou.

Some Argentine business sectors believe the Argentine peso is over valued thus harming the country’s exports’ competitiveness. However the Argentine central bank intervenes whenever necessary in the foreign exchange market, which theoretically runs on a “managed flotation system”.

The Argentine peso has been slowly but steadily decreasing its value. By the end of 2010, the dollar stood at 3.90 pesos and now it does at 4.20 pesos. Thus, so far in 2011 the peso has devaluated 5.8% against the US dollar. In 2010 devaluation was 4.5%.

Boudou was also replying to statements from FIEL (Foundation for Latin American Economic Investigations) that cautioned about some outside effects that could impact on Argentina such as a fall in international commerce or if the “Brazilian currency were to devalue strongly”.

FIEL economist Daniel Artana said that a hypothetical devaluation of the Brazilian Real could affect Argentina because “our industrial trade is closely paired with the Brazilian market”.

Further more “if this happens, Argentina will go through a stage of devaluation alongside Brazil”.

Economist Daniel Artana added that “if it happens, such as in 2009, a sharp fall in international commerce, or if the Brazilian currency were to devaluate strongly, or if a deceleration is noted in China, which would lower commodity prices, Argentina will be affected, but this is not part of the immediate outlook”.

“On a global level the situation is difficult, but I don’t think that the world economy will go into a recession, like it did in 2008/2009, where Wall Street and European markets experienced huge losses”, he added.

Regarding the international financial crisis, Boudou said that the Argentine government’s aim is “to strengthen the relationship with our neighbours, promote regional trade” as part of the overall policy of substituting imports and creating and ensuring “jobs for Argentine labour”.

The minister underlined that Argentina “is in no hurry to implement emergency or contingency plans because we have been working for eight years in the big problems such as cutting drastically our foreign indebtedness, so our exposure is minimum”.

Cristina Fernandez and Boudou garnered over 50% of the ballot at the 14 August open, simultaneous and compulsory primaries, which was seen as an anticipation of what could happen next October when the presidential election. Mrs Kirchner landslide showed she had more votes that all her potential competitors put together.

The success of her administration has been based in massive government spending triggering a consumption boom and convincing local manufacturers to substitute imports. “You ensure the supply for the demand we are creating”, has been the message to the business community.

Obviously Argentina has also benefited from the high prices of commodities and the strong demand from neighbouring Brazil for manufactured goods in the framework of Mercosur.

The Argentine economy expanded 8.8% in the first half of the year compared to the same period in 2010. Last year the economy grew a record 9.2% following a meagre 0.9% during the crisis year of 2009. From 2003 to 2008, Argentina expanded at a sustained annual average ranging from 7% to 9%.

Categories: Economy, Argentina.

Top Comments

Disclaimer & comment rules
  • GeoffWard2

    It is one thing to declare tothe world “We have no Plan B!”

    It is quite another to have no Plan B.

    Aug 22nd, 2011 - 02:52 pm 0
  • Gianni

    No plan B, great job Argentina

    Aug 22nd, 2011 - 03:21 pm 0
  • xbarilox

    It's impossible not to devaluate Boudou, where did you study Economics? hahaha “The Argentine peso has been slowly but steadily decreasing its value.”

    Aug 22nd, 2011 - 10:48 pm 0
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