Solution to crisis in Argentina will not come in the short term, says expert

The economic crisis that Argentina faces, with a shot in the inflation should not have a short-term solution, assesses economist and Insper professor Otto Nogami.

In an interview with CNN this Monday (1st), he says that overcoming the country’s economic problems “will take a long time due to the need to rearrange the productive sector, in logistics. There are several homework that the government will have to do, as long as there is interest in making Argentina a competitive country, as it has been for many years”.

For Nogami, the origin of the country’s problems lies in the moratorium announced in 2001, when the government admitted that it would not be able to pay its debts.

The movement “affected the entire productive sector of the economy, driving away a lot of productive foreign capital”, and the economy has not recovered since then.

The consequence is an imbalance between production capacity and domestic demand in the country, which is not met, leading to a rise in prices due to low supply.

“Governments have never bothered to reorganize the productive sector of the economy, so this problem has been lengthening, also due to political disputes, so this imbalance is increasing more and more”, points out the professor.

There is still a low reserve exchange government, leading to difficulties in importing products and services to meet domestic demand.

According to the professor, the government’s path to controlling inflation must go through a continuation of high interest rates, seeking to cool prices and make room for a reorganization of the economy.

“There are other concerns, such as the fiscal imbalance itself, which the government has to quickly readjust, as well as trying to reverse the trade balance deficit to generate more dollars, giving more security to foreign investors that would flow to Argentina,” he says.

Nogami assesses that the the country’s new Minister of Economy Sergio Massa, will be important to negotiate with the parties, trying to overcome a traditional political dispute in the country and help the government to meet the population’s demands for an inflation control, even if with unpopular measures.

He affirms that the popular demonstrations act as “a great pressure for the government, which has to urgently find a very short-term solution to accommodate the population’s unrest and have space to adopt urgent economic policies to get Argentina out of this crisis”.

“For decades, the government has faced difficulties precisely to put the economy on track, it has been a problem since the 1960s, and the political conflict within Argentina is extremely large, in addition to the importance of unions. There is a need to have broad negotiation to set the horizon for the economy,” he says.