In 2019 Argentina moves against the rest of South America. While the other economies -with the exception of Venezuela- face a favorable scenario, with one-digit inflation and growth rates between 1 and 4%, Mauricio Macri goes for re-election in average recession and runaway prices.
Last week, Itaú, the largest bank in the region, organized a seminar at its headquarters in San Pablo, where it presented its business plans in the digital area and its projections for the six South American countries in which it operates. : Brazil, Argentina, Uruguay, Paraguay, Chile and Colombia.
The expectations are positive, even for the management of Jair Bolsonaro in Brazil who has been facing several clouds. Growth forecasts for the largest economy in the region have been declining while Bolsonaro’s fate is tied to the pension reform that for some analysts does not go as fast as expected. However, from Itaú they are confident that “the popularity of the government will help the reform take shape. And this will allow a significant saving of one trillion reais, “said Thiago Macruz, an analyst at Itaú BBA. In turn, this positive pull should help lower the interest rate (now 6.5%) and unemployment, which will be 11.8% this year.
While Itaú maintains the 2% growth forecast for Brazil by 2019, Juan Carlos Barboza, the bank’s chief economist for the Southern Cone, admitted that “there is a risk that it will be lower. The labor market is losing strength. Brazil is in the intensive fiscal unit and will remain there for a few years. “
“The perspectives are positive for the entire region, except for Argentina”, which corresponds to the wait and see category. “We see an economy with fewer fiscal imbalances that will probably contract slightly again this year, more than 1%, mainly due to the negative statistical carryover effect that 2018 leaves.” Regarding inflation, Barboza said that “the rate has accelerated again. Our forecast for this year went from 30 to 35%. This forces the Central Bank to be very tough in its monetary policy. “
Even so, they estimate that the economy will begin to recover in the second quarter, mainly due to the impact of agriculture. In this prognosis it is implicit that either Macri gets re-elected or a third way is imposed, like Roberto Lavagna’s. “Our baseline scenario is one of continuity of economic policy, so the fiscal adjustment plan would continue. The year would end with a very low primary deficit – around 0.5% – and that would allow the economy to recover, to the extent that Argentina is attractive to the markets. “
“The market is open to all countries in the region, except for Argentina,” said Macruz. And detailed that this year it is expected that debt issues throughout Latin America reach US $ 75,000 million. The figure is far from the US $ 148,000 million that were issued in 2017. With the amount planned for this year, the region will have a balance in favor. It will go out to cancel debts for US $ 100,000 million and issue for US $ 75,000 million, which will imply that it will de-indebted for US $ 25,000 million. This contraction is due to the fact that governments prefer to finance themselves in the local market before going out to look for dollars abroad.
The scenario could change if the Venezuelan situation is defined and a new government decides to face a restructuring of that country’s debt. If this were to happen, another US $ 60,000 million would have to be added to the region’s emission menu. But the Venezuelan restructuring is not part of Itaú’s short-term scenario. “It could take 24 or 36 months for it to materialize,” they estimate.