Argentina’s President Mauricio Macri has hit the country’s exporters with a new tax to help stop the bleeding on an economic crisis that has seen the peso lose more than 40% of its value this year.
“This is a very bad tax” said President Macri in his address to the nation on Monday, “but this is an emergency and we need you [exporters] to do your part”.
Argentina’s president also contracted his cabinet, saying a more compact team would be best to address the current crisis.
“Each moment requires a different team” Macri said in his televised speech.
Economy minister Nicolas Dujovne kept his job, as did Central Bank president Luis Caputo, and both are headed to Washington to try to get the IMF to disburse parts of the $50bn credit line sooner.
The Argentine leadership blamed the country’s current woes on the drought, global rates, external volatility and the latest corruption scandal of the notebooks engulfing the opposition and the prior administration, affirming that things were going well until these issues started to thwart progress.
“The fiscal deficit is 70 years old”
Over a press conference before boarding to the US, Dujovne explained the measures they had in mind to bring the fiscal deficit back to normal.
First, get IMF disbursements planned for 2020 and 2021 at an earlier date.
According to Dujovne, this will dispel any doubts about Argentina’s ability to finance itself in 2019, saying it “will strongly protect us,” before lining up internal measures to curb the crisis.
“In 2019 instead of a deficit target of 1% to 3% of GDP, we will go towards a fiscal balance before payments of interests” said Dujovne.
To reach that result the economic team pledges to cut public spending, expenses, subsidies which will be transferred to provinces, and get additional revenue from the new tax on exports, which they pledge will be temporary, ending by December 2020.
“Lowering the deficit will lower our need to issue debt” said Dujovne, “and protect us from external volatility.”
The Merval was down more than 2% after the authorities’ presentations and closed at negative 1.66%.
Exporters underscored the drop across the stock index, with aluminum producer Aluar leading the charge.
The exchange rate might have been a bit supported by lower volume given the US holiday, but the initial reaction pushed the peso further down to close at 38.49 to the dollar after opening at 36.89, according to Bloomberg.