Argentina’s economic activity slackens to a worrying level
The government faces a tough balancing act between combating a recent spike in COVID-19 cases and reopening the economy
Argentina’s economic activity plunged 26.4%, the country’s official statistics agency said on Tuesday, the worst monthly fall on record as the country reeled from the impact of the novel coronavirus pandemic and a nationwide lockdown.
The April drop, ater the South American grains producer imposed the lockdown in midMarch, was worse than the 21% decline predicted by analysts polled by Reuters, underscoring how badly the pandemic has batered local industry.
Argentina’s government faces a tough balancing act between combating a recent spike in COVID-19 cases and reopening the economy. It has extended a quarantine in and around Buenos Aires but relaxed rules in other parts of the country.
The fall, which followed an 11.5% drop in March, surpassed declines during crises in 2002 and 2009 and was the worst since statistics agency INDEC started record keeping in 1993.
Already mired in recession for two years and in default on foreign debts, Argentina is headed for an annual economic contraction in 2020 that organisations, including the International Monetary Fund, have estimated at about 10%.
The worst-hit sectors included construction along with the hotel and restaurant industry, which fell over 85%, INDEC said. Argentina is meanwhile racing to restructure around $65 billion in foreign debt, with a deadline for a deal in late July ater talks stalled earlier this month, despite the government and creditors having edged close to a deal.
The country’s bonds rose 1.2% on hopes that two sides will bridge their differences in coming weeks.
“The debt negotiations continue to move forward as economic indicators remind us that there are more difficult problems to solve along the way,” Argentine investment services firm Grupo SBS said in a report.
The planned takeover of Argentine soya crusher Vicentin is “on standby” while the government explores options for dealing with the failed company, including a possible private-public partnership, sources close to the situation said on Wednesday.
Grains farmers owed money by Vicentin could end up as shareholders in the company, which went broke ater going on a credit-fueled expansion last year, said the sources, who asked not to be named because the negotiations were private. Center-let Peronist President Alberto Fernandez early this month decreed an intervention in Vicentin, once Argentina’s No. 1 exporter of soy byproducts, while his administration was to seek congressional approval for a state takeover.
That plan was put on pause ater the government of Santa Fe province, where Vicentin is based, recently offered to lead the intervention in the company.
“Vicentin rejects Santa Fe province’s project. It’s not interested in it and doesn’t recognize the proposed intervening agency,” said a source close to the company.
Presidential adviser Gabriel Delgado told reporters the state was the final guarantor for maintaining employment and the health of the export sector as the country struggles with a recession compounded by the coronavirus pandemic.
“The state is looking at all alternatives that would guarantee the recovery of the company. The market in six months did not find a solution and now we are working to solve a problem of employment and production at very difficult times for the Argentine economy,” Delgado said.
“The state is using a set of exceptional tools to deal with an exceptional situation,” he added, addressing worries among farmers and export industry officials that the government was using Vicentin to gain a foothold in the key grains sector.