Argentine Economy Minister admits to 'Hood Robin' policies
Speaking in a Buenos Aires cable news interview, Argentine Economy Minister Nicolás Dujovne described his economic policy as "a transfer from families to corporations."
"Hood Robin," he added.
It was an unusually frank response to questions by TN cable news' senior business anchor Marcelo Bonelli about a risky boom recently in carry-trade activity - the "financial bicycle," as it's known in Argentina.
The bicycle, made possible by a series of financial deregulation decrees issued by President Mauricio Macri within days of taking office 18 months ago, has been largely financed by the Central Bank itself through short-term bills known as Lebacs.
The Lebacs, issued in pesos and typically purchased for a 28 or 35-day maturity, pay an annualized 26% rate - over 10% in dollar terms. Attracting mostly domestic speculators, Lebacs are typically rolled over at the end of the month, with the profits used to buy dollars that are then wired to offshore accounts.
The value of Lebacs outstanding has nearly quadrupled since Macri took office to 940 billion pesos ($60 billion). The most recent payout, on June 19, suggests growing market unease over the Lebacs: a record 23% ($8 billion) were cashed in, rather than rolled over.
The scheme has drawn comparisons to the bubble created at the height of Argentina's last dictatorship in 1980, when the Argentine Central Bank paid up to 60% interest in dollar terms to attract investment - only to end in a financial collapse in 1981 after insiders "bicycled" some $20 billion in profits overseas.
·Trickle down·
Other Macri policies, issued likewise by decree, are estimated to have transferred at least $18 billion (3% of GDP) to the nation's powerful landowning, mining, and financial interests last year alone.
Tax cuts for these sectors helped push the nation's budget deficit up by 62% in 2016. Interest payments on Lebacs and other borrowing raised deficits by another 55% in the first five months of 2017.
Investors have nevertheless welcomed Argentina's return to global bond markets, with over $43 billion in bond issues in 2016 alone - compared to around $2 billion annually during the previous decade. Some $35 billion in speculative (portfolio) investment poured into Argentina in 2016 - a record.
Around 80% of foreign investment went to the short-term financial sector however. Foreign direct investment plummeted by over 50% last year to less than $6 billion, leaving little for the productive sector.
This trend, plus austerity policies including utility rate hikes of up to 1000%, has pushed unemployment from 5.9% in 2015 to 9.2% and real wages down by 11%.
Official data suggests that Argentina's 2016 recession may have turned the corner in March after Macri, whose right-wing coalition is trailing in polls for upcoming mid-term elections, approved a sharp hike in public works and social spending.
The recovery, even so, is so far one of the weakest in Argentine history, with GDP inching up 0.6% in April from the same time last year after falling by 3.1%.
At: https://translate.google.com/translate?sl=auto&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.diarioregistrado.com%2Feconomia%2Fdujovne-admitio-la-economia-con-macri-es-como-robin-hood-pero-al-reves_a5954fad2d669e67b19cfae21&edit-text=
Bicycling in Buenos Aires' financial district, where the "bicycle" has made a comeback among speculators.