Argentina's Macrisis: GDP plummets 5.8% in May, worst since 2002 collapse

[sandensea]

Data published today by Argentina's National Statistics and Census Institute (INDEC) show that the nation's GDP fell by 5.8% in May compared to the same time last year.

The contraction in the region's third-largest economy was the most severe since October 2002, at the depths of a financial collapse and the largest sovereign default up to then.

Most of the decline this year, according to INDEC, came from agriculture, which plummeted 35% amid the worst drought since 2009. Industrial ouput fell 1.9% amid a 47% prime rate - the highest since 2002.

The economy had recovered from the 2016 recession with 2.9% growth last year. Since then, some 155,000 jobs have been lost from January to May - pushing unemployment up to 9.1%.

The loss is equivalent to 1.2 million jobs lost in the U.S.

Recurring recession

This is the second recession since President Mauricio Macri took office in late 2015.

The current downturn, which began in April, put May GDP 4.9% below the same month in 2015 - the year Macri was narrowly elected promising to spark growth with deregulation and tax cuts.

But a sharp devaluation and utility hikes of over 1000% have hampered the economy and added to already high inflation: Prices have risen 30% from last year, and 115% since Macri was elected - with real wages falling an estimated 13%.

Costly corporate tax cuts failed to spur investment or exports, and nearly $54 billion instead left the country over the past 30 months - $3 billion in June alone.

Argentine foreign debt, as of March, in turn rose 70% to $254 billion, with the public sector's share doubling to $176 billion.

These totals exclude $15 billion drawn from the IMF credit line on June 22 - part of a $50 billion bailout the IMF offered as a credit line in exchange for deep budget cuts which opponents see as both unconstitutional and recessionary.

Troops as cops

Today's GDP data comes a day after Macri signed a decree allowing the nation's armed forces to engage in law enforcement and domestic intelligence - a decree likewise condemned as unconstitutional by most of Argentina's political spectrum.

"It's no coincidence," opposition senators noted, "that now that the situation is rapidly worsening, Macri resorts to law-and-order rhetoric in order to degrade democracy and the rule of law."

At: https://translate.google.com/translate?sl=auto&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=https%3A%2F%2Fwww.baenegocios.com%2Feconomia-finanzas%2FLa-actividad-economica-se-desplomo-58-en-mayo-20180724-0013.html&edit-text=

Argentines line up last week at a free produce stand organized by small growers as a protest against both the crisis and Macri's austerity policies.

Large landowners have been spared austerity, and will insetad see further tax cuts this year.

[Judi Lynn]

1. Clearly Macri expects the personal climate to turn seriously ugly because he has harmed the country,

pushed the people beyond all endurance, entered servere crisis a long time ago, and is anticipating their desperation to drive them to protests he wants to discourage in the most threatening way possible before he gets even more violent with dissent.

He must realize he passed the point of no return.

Very dark and very ugly.

It's not as if he didn't know this was coming, since he has always publicly boasted of supporting the vicious previous military dictatorship which plunged the country into chaos, and murdered over 30,000 suspected leftists after torturing them, all with the blessings of its northern neighbors in the US Republican Party.

Such a gloomy day for those poor citizens who turned out to protest in a completely legal way, the only means at their disposal to ask for consideration from the government.

[Judi Lynn]

2. Michael Hudson: Argentina's New $50 Billion IMF Loan Is Designed to Replay its 2001 Crisis

Michael Hudson: Argentina’s New $50 Billion IMF Loan Is Designed to Replay its 2001 Crisis
July 23, 2018


The recently elected neoliberal government of Mauricio Macri has decided to seek a $50 billion IMF credit line, which will only enable more capital flight for the upper class and greater unpayable debt for the rest of the population, says the economist Michael Hudson.

Transcript at:
https://therealnews.com/stories/michael-hudson-argentinas-new-50-billion-imf-loan-is-designed-to-replay-its-2001-crisis

[sandensea]

3. Prof. Hudson's right - and even most of the business press is more or less saying the same thing now

Thank you for finding and posting this, Judi. Recommended to anyone who'd like to know, in a nutshell, what the current crisis down there is about, and why - and for whose sake - the IMF rescued Macri (if only temporarily).

I'd add only that the IMF bailout has thus far been for $15 billion, rather than $50 billion. The larger figure is the size of the credit line; but it's on stand-by, which means that further approval is needed for Macri to tap anything beyond the $15 billion he's already borrowed.

And Mnuchin (who, as you know, can veto any IMF decisions) openly said in Buenos Aires last week that he won't approve any further draws from the credit line.

This, of course, means that once Macri uses up the $15 billion to finance capital flight, as Prof. Hudson explained, Argentina will have to start drawing from their own reserves. That should happen around November.

All this is almost exactly what happened in 2001 - even down to the month. And as far as December, hopefully history won't repeat itself this time. One can only hope.

Thanks again, Judi. Have a great Sunday.