EXCLUSIVE: Argentina will maintain capital controls and seek more foreign exchange reserves

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Argentina’s ability to remove capital controls will depend on its ability to accumulate foreign reserves and not before, the country’s economy minister said.

In an exclusive podcast interview with LatinFinance, Martín Guzmán, admitted that the imposition of controls is not something he wants to stay in place any longer.

We don’t like capital controls, but in order to change them and avoid a worse evil, we need to build resilience by building up foreign exchange reserves. And this is what is happening now in the economy “, Guzman said.

Listen to the full interview for Guzmán’s take on the concluded debt negotiations, the economic outlook, the state of capital controls, and discussions with the International Monetary Fund (IMF).

Below are some highlights from the interview that took place as part of LatinFinance’s Offer of the Year rewards program.

Last September, the central bank ordered all companies with principal payments of more than $ 1 million per month due by March 31, 2021 to extend the repayment by two years on at least 60% of what is of. The measure aims to protect the bank’s gross reserves, which have fallen nearly 50% in the past year and a half on a flight to the dollar due to a sharp depreciation of the peso against the US dollar. Many companies have been forced to restructure their debts as a result of current policies.

Argentina, which concluded sovereign debt restructuring with private sector creditors in August, is negotiating a deal new loan agreement with the International Monetary Fund for an extended Fund facility. This EFF would replace the failed 2018 $ 57 billion program, which remained from the previous administration.

Guzmán maintains that the timetable for reaching an agreement with the IMF will come in March or April.

“And in the plan with the IMF in the program with the IMF, there will be objectives of accumulating foreign exchange reserves, but there will also be flexibility to recalibrate over time. We are living in a period of pandemic and there will be there is uncertainty about the evolution of aggregate demand at the global level, so we must give flexibility to recalibrate it, ”he said.

“This is something that is still under negotiation. So I cannot be more explicit. But we certainly have an idea of ​​when it will be possible to move towards a system of macroprudential regulation,” he added. . Guzman said.

In order to strengthen foreign exchange reserves, the government is focusing its development on exports, in particular the agro-industrial sector, energy, mining and knowledge services.

Guzmán expects the economy to reach a growth rate of 5.5%, which is higher than the latest IMF / World Bank regional GDP forecast of 4.1% in 2021. This exceeds the rate forecast growth in Brazil of 3.6% and Mexico of 4.3% for this year. He said there might even be a slight surprise in the form of a less dismal performance in 2020. The economic contraction could approach 10% for last year rather than previous estimates for a contraction of 12, 5%.


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