If anything could further complicate Argentina’s economic situation under Milei’s administration, it would be an international financial crisis that would make it more difficult for the government to obtain external financing and maintain the price of the dollar, avoiding having to devalue it. It is still too early to know how it will develop, but the 12.4% drop on Monday of the main index of the Tokyo stock exchange, the Nikkei, shows that the world scenario is far from positive. This is the biggest stock market fall in Japan since 1987 and had important repercussions around the world.
The announcement of the increase in the unemployment rate in the United States – it reached 4.3% in July – was interpreted by concentrated capital as a sign that production in the North American country will decline. Japan turned out to be the country most affected by this surprising news for the markets, as its economy is stagnating and it has been fostering a possible bubble with loans at rates close to 0%. The decision of the Japanese bank to increase this rate has encouraged the flight of investment funds that interpret that the Asian country will enter a negative economic cycle.
Milei and Caputo’s hopes are pinned on getting dollars into the country by increasing the external debt and the inflow of investments. The combination of fear of a recession in the United States, the financial clouds in important Asian countries (with their global impact) and the reduction of growth in China; make it less likely that international organizations or large companies will give credit or invest in Argentina (as well as in other countries considered “risky” or “emerging” by investment funds and risk rating agencies). The president never tires of repeating in each of his speeches that capitalism is the greatest source of prosperity for humanity; the critical world situation makes his words clash even more head-on with reality.
These contradictions were reflected on Monday at a national level in the worsening of all financial fronts in Argentina. The country risk (index prepared by JP Morgan on the possibility of default on foreign debt) reached over 1,700 basis points, to close at 1,653, an increase of 2.53%. The parallel dollars – MEP and CCL – and the blue dollar also increased, causing the exchange gap to exceed 40% again. On Wall Street, ADRs (shares of Argentine companies) lost more than 12% and closed with losses of up to 4.6%. On the Buenos Aires stock exchange, the initial bleeding that led the Merval to fall more than 8% at the opening was stopped and it closed with a drop of 0.9%. Meanwhile, debt bonds, although they reduced the losses that were seen early, still ended with losses of up to 2.4%.
The Minister of Economy, Luis Caputo, has been using the Central Bank’s (BCRA) dollars to intervene in the parallel markets. The problem is that the net reserves (excluding those that are not directly owned by the BCRA) are in negative territory and are falling week by week. Both the IMF and the agro-exporters are demanding that the Government devalue the currency in order to obtain the inflow of foreign currency to continue paying the fraudulent foreign debt and increase the profits of the rural entrepreneurs.
The panorama opened by the deterioration of the international economy favors the depreciation of the currencies of dependent countries (such as Argentina and Brazil), the fall in the price of commodities – such as soybeans – and the direction of concentrated capital to assets of countries that are considered more stable. All elements that could complicate the plans of the Government that bets on the plundering of natural common goods with the RIGI (called commodities by businessmen), the entry of investments through money laundering and access to new debt to face the unpayable debt maturities that accumulate from 2025 onwards.
Milei and Caputo sought to contain inflation at the cost of a deep economic recession that has already caused the loss of 300,000 jobs and a jump in poverty to 55%. If the financial crisis and recessionary tendencies deepen worldwide, the Government’s direction would lead to even greater consequences. The President is submitting to a system with symptoms that could lead to crises like those we saw in 2008 that can bring nothing good for workers and the great majority. Building an international movement for the cancellation of the debts of oppressed countries is fundamental to prevent the costs generated by large imperialist companies from being paid by those who have the least.
Source: www.laizquierdadiario.com
