The World Bank joins a long line of experts criticising Argentina’s lack of fiscal management
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Argentina needs an “urgent change of direction” and better relations with financial markets if its economy is to recover medium term.
The Argentine economy needs an urgent change of course which would have the effect of reestablishing normal relations with the financial market, a crucial step to open a maneuvering space in an ever more complex environment, suggested Augusto de la Torre, World Bank chief economist for Latin America.
Without giving more details De la Torre simply said that “humbly speaking if I was in Argentina’s shoes, that would be my priority”.
However De la Torre emphasized that access to financing is convenient not only for ‘oxygen’, but because “as long as there is not clarity regarding normalizing relations and access to financing”, expectations can lead people to adopt “defensive positions that will only further complicate things”.
“If there are no normal relations with financial markets it’s only normal that people will take refuge in the US dollar or try to take their money out of the country, and that will really complicate things”.
Speaking during a press conference on Tuesday in Washington in the framework of the annual assemblies of the IMF and the World Bank, De la Torre also acknowledged inflationary pressures and the option of devaluating a currency, but “it’s useless if that move immediately is reflected in prices”.
The economist also regretted the ‘tribulation’ in which Argentina is immersed because of its long dispute with the speculative funds, which influence the country’s access to money markets.
Likewise De la Torre revealed that there is no date ‘yet’ for the disbursement of World Bank loans to Argentina, but “we are working on that” as part of the financial strategy agreed and approved a few weeks ago.
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Brasil and China are coming to Argentina aid? It looks like an alliance between a major Brazilian merchant bank (headed by the billionaire Andre Esteves) and one of China’s “Big Four” could settle this dispute at a very early point of 2015 just before the elections. But the operation will have to await the expiry of the RUFO (rights upon future offers) clause which ends of this year. This clause has prevented an earlier solution as it mandates no investor should have preferred treatment with these defaulted bonds.
Brazil and China will do this due to the importance of Argentina to their economies. The way the US government has bullied Argentina will not be forgotten for a long time however.