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Leading Argentine corporation claims the economy is in ‘very fragile situation”

Thursday, November 1st 2012 - 06:47 UTC
Full article 49 comments
Paolo Rocca, a businessman all the financial community listens to Paolo Rocca, a businessman all the financial community listens to

One of Argentina’ leading international corporations, Techint, made public a 200 pages report sent to the Buenos Aires stock exchange with a devastating picture of the country’s economy which “continues in a state of fragility”.

“The chances for Argentina to obtain external financing are very limited” said the report from the group belonging to Paolo Rocca, adding that the country “remains in a cone of uncertainty” and emphasized the need of tackling inflation and of investing in infrastructure.

The report which describes the Argentine economy as fragile also addresses some irritating issues for the administration of President Cristina Fernandez such as the official statistics from Indec, private investment and the “very delicate fiscal situation”.

“Inflation could continue to increase and have a negative impact in the Argentine economy”, says the report adding that “an important depreciation of the Peso vis-à-vis the US dollar could impact on the financial situation of Argentine companies”.

The report implicitly refers to a possible devaluation of the Argentine Peso arguing that in recent years, government policy has been to intervene, in a limited way, in the foreign exchange markets with periodical operations trading dollars. However the Argentine government won’t be able to continue with its current policy towards the Peso”.

“There is a high degree of uncertainty referred to economic indicators” and this could influence “shortening contract periods and challenge the possibility of companies to plan and make decisions to the future”.

Regarding the official stats office Indec, the Techint report says that following modifications to the methodology to calculate consumer prices index, “credibility of the office has been at stake” with growing questions about the accuracy of the CPI as well as other indexes such “as those measuring poverty, unemployment and GDP”.

The Techint picture also warns of a scenario with “an increase in unemployment, in taxes or the need to expand the monetary basis and inject liquidity to the financial system”, by printing money which leads to greater inflation and could strongly impact on the Argentine economy.

This is not the first time that the government of Cristina Fernandez, particularly the Federal Planning minister, Julio De Vido and the Deputy Economy minister Alex Kicillof has clashed with the Rocca group over policies.

“Since 2008 the Argentine government has lost course. It’s not clear where it is heading. Argentina has a great potential but is very poorly managed. Since 2008, competitiveness has been falling”, said Rocca not so long ago.

The Argentine entrepreneur had to send a letter to Cristina Fernandez trying to clear up his statements (‘taken out of context’) and to complete ‘peace talks’, Deputy Minister Kicillof went on an official visit to one of several plants from the Techint group.

Categories: Economy, Politics, Argentina.

Top Comments

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  • surfer

    'State of fragility', read 'meltdown';

    Another default around the corner too....

    Nov 01st, 2012 - 07:03 am 0
  • LEPRecon

    Off with his head. How dare he insult the 'Dear Leader' by telling the truth!

    Nov 01st, 2012 - 07:10 am 0
  • Britninja

    So will Techint be...

    A: Nationalised.
    B: Invaded by tax inspectors.

    Place your bets!

    Nov 01st, 2012 - 07:28 am 0
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