Argentina's economy is seen growing 4.6% next year, improving after drought and a slowdown in top trading partner Brazil took a toll in 2012, the central bank president said in an interview published on Sunday. She also advanced that the so called ‘dollar clamp’ or strict restrictions on the purchase of foreign currency remain.
The expansion in Argentina, Latin America's No. 3 economy, cooled abruptly this year, ending a boom period that started in 2003 when the country began recovering from a crippling crisis and the world's largest-ever sovereign debt default.
We're expecting a good 2013 with growth in economic activity of 4.6% and investment that will end the year at 24% of GDP central bank Chief Mercedes Marco del Pont told Argentine newspaper Pagina 12.
In a report released late on Friday, the central bank estimated 2012 growth at about 2%. This confirms private predictions that growth will be below the 3.26% threshold that would trigger roughly 4 billion dollars in payments next year on growth-linked GDP warrants.
The warrants, securities issued as a deal sweetener during the country's 2005 and 2010 debt restructurings, only pay out when annual growth tops a certain threshold. The payment is made in December of the following year.
Argentina's 2013 budget earmarked 7.97 billion in central bank foreign reserves to pay debt next year. But Marco del Pont acknowledged that without payments coming due on the GDP warrants, there will be excess funds.
There's a surplus foreseen in the budget. What is not paid on the GDP warrants will be able to go towards public investment, as long as this has a neutral monetary impact, Marco del Pont was quoted as saying.
Argentina has no inflation-targeting regime and a central bank charter reform approved by Congress in March expanded the bank's mandate to include financial stability and economic development with social justice.
Marco del Pont rejects orthodox explanations of price rises and defends the strong expansion of money supply by saying it reflects greater demand for Argentine pesos in a growing economy.
She also said there will be no loosening of strict currency controls in place since October 2011. Individual savers are only allowed to buy foreign currency now when they travel abroad, which has sent the black-market rate for dollars soaring in a country where people often seek refuge in greenbacks (between 40% and 50% higher).
She said the money that Argentines used to hoard in dollars should be channelled into productive investments. Before the controls were imposed, Marco del Pont said at least 1 billion dollars a month were purchased on the local foreign exchange market.
“Argentina has no shortage of dollars; it has enough dollars needed to make its purchases, pay debt and transfer profits.”
Marco del Pont explained that “having limited the purchase of dollars was a strategic decision made to ensure that the country would not get stuck in the international bottleneck again.”
“The society also understood why these measures were taken. The country has all the dollars the economy needs to continue growing, to pay its debts”, concluded the official.
With regard to new requirements that banks lend the equivalent of 5% of their deposits to companies - a policy first implemented in the second half of 2012 - Marco del Pont said sanctions will be used to force compliance.
Banks that don't comply with the objective this year will have the difference 100% immobilized in an account at the central bank and returned over time once the bank lends the full amount, she explained.