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Tue Sep 20, 2016, 02:04 PM

Capital flight from Argentina doubles since Macri took office, adding $37 billion in foreign debt.

Last edited Wed Sep 21, 2016, 02:35 PM - Edit history (2)

The Central Bank of Argentina reported that capital flight rose to $1.5 billion in August, reaching a total of $9 billion during the first eight months on 2016. This was twice the level of capital flight registered in the first eight months of 2015.

Central Banks data shows that the increase in capital flight mostly took place by way of dollar hoarding, which reached $1.567 billion in August - a 130% jump from August 2015 dollar purchases. This practice was facilitated by a Central Bank decree deregulating the wholesale purchase of dollars and their transfer abroad. The decree, enacted with no congressional oversight, was signed on December 17, 2015 - a week after the right-wing Macri administration took office.

President Mauricio Macri repeatedly asserted that financial deregulation was necessary to attract foreign investment. Foreign direct investment, however, has declined by 51% during the first half of 2016. Increasing capital flight has in turn forced the Central Bank to intensify its dollar sales, which reached a net total of $503 million in August.

Exports, which Macri sought to stimulate by decreeing a 40% devaluation and a sharp cut in withholding taxes in his first week in office. Exports, however, were down 11% in July from the same time a year earlier, and mostly due to a 9% drop in volumes. While part of that was due to the deepening recession in Brazil, Argentina's largest trading partner with around 30% of the total, the devaluation proved counterproductive to export competitiveness in that it also doubled inflation to 47% at its peak in July.

Record foreign debt

"Everything indicates that the exchange rate of 15 pesos remains uncompetitive for exporters, and is instead an incentive to hoard foreign currency and to travel abroad," economist Miguel ┴ngel Broda, a supporter of the adminsitration, told ┴mbito Financiero. Indeed, the demand for tourism dollars so far this year has risen by 16%.

In all, gross international reserves at the Central Bank fell by $1.36 billion in August to $31.15 billion. Central Bank reserves have, even so, risen by $5.6 billion - something often touted by the Macri administration as proof of policy success. The increase, however, is entirely due to a $37.3 billion net increase in public foreign debt, which ballooned from $83.9 billion in December 2015 to $121.2 billion in June.

This is the sharpest such increase on record, and made up 60% of all new emerging market debt over the same period.

Argentina's public foreign debt is now an all-time high, eclipsing the $116.2 billion reached in December 2004 - just before former President NÚstor Kirchner shaved $50 billion in foreign debt by way of a successful bond swap with 76% of bondholders (this grew to 93% after a second swap in 2010).

Some $16.5 billion, the largest single bond issue ever for a developing country, was contracted in April to pay off Caribbean vulture funds and other holdouts which had bought old, defaulted Argentine bonds for pennies on the dollar had been granted payouts averaging 1,600% by New York courts.

Inconvenient at this time

Besides foreign obligations and capital flight, much of this added debt has gone to finance yawning budget deficits. The federal deficit is projected to rise by 60% in peso terms, from 225 billion in 2015 to 360 billion pesos in 2016. While the dollar figure would be similar ($24 billion), in terms of ratio-to-GDP the fiscal deficit would rise from 3.9% in 2015 to 4.8% this year - the highest since 1990.

Macri had made rising budget deficits a centerpiece of his 2015 campaign. Economy Minister Alfonso Prat-Gay, who presented the administration's 2017 budget request to Congress last week, admitted, however, that "a lower deficit would be inconvenient at this time." While his 2017 budget projects a federal deficit of 4.24% of GDP - a slight improvement of 2016 levels - market analysts are skeptical over his assumptions of 3.5% economic growth and 17% inflation.

Inflation was 43.5% as of August and real GDP, according to official INDEC figures, contracted by 4.3% in June from the same time a year earlier.

At: https://translate.google.com/translate?hl=en&sl=es&u=http://www.politicargentina.com/notas/201609/16624-se-duplico-la-fuga-de-capitales-en-lo-que-va-del-ano-supero-los-us-9000-millones.html&prev=search

And: https://translate.google.com/translate?hl=en&sl=es&tl=en&u=http://www.diarioregistrado.com/economia/la-deuda-externa-ya-supera-los-188-000-millones-de-dolares_a57e1a4fbd17589f27a53e66c

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Reply Capital flight from Argentina doubles since Macri took office, adding $37 billion in foreign debt. (Original post)
forest444 Sep 2016 OP
Judi Lynn Sep 2016 #1
forest444 Sep 2016 #2

Response to forest444 (Original post)

Wed Sep 21, 2016, 02:14 AM

1. It's like reading a book written by a lunatic, following Macri's "progress," isn't it?

My gosh!

Macri campaigned against Cristina's candidate Scioli by attacking her financial record, then plunged the country into the toilet for everyone other than those in the truly privileged sector.

What insight from Economy Minister Alfonso Prat-Gay! No wonder they moved so swiftly toward the void.


Macri, taking Prat-Gay for a walk of shame.

Prat-Gay, going to get right back on the horse that threw him.

Prat-Gay, with the Chairman of the Central Bank, Federico Sturzenegger.

Federico Sturzenegger (b. Rufino, 11 February 1966) is currently the Chairman of the Central Bank of Argentina. Sturzenegger has a PhD in Economics in MIT and is a professor at Torcuato di Tella University.[2] Previously he was a National Congressman for the conservative party PRO. Academically he co-introduced Dark Matter, a term referring to 'invisible' assets that explain the difference between official estimates of the current account and estimates based on the actual return net financial position. Throughout his academic career he has published close to fifty articles in refereed journals as well as eight books. Sturzenegger is being investigated for crimes during his administration as a member of government in 2001.[3]


Found a photo of Cristina when she must have been almost a kid! Easily recognized! [/center]
Thanks for the updated news, forest444.

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Response to Judi Lynn (Reply #1)

Wed Sep 21, 2016, 03:05 PM

2. Very Ó propos, Judi. Prat-Gay and Sturzenegger have been at each other's throats lately.

Whereas Prat-Gay has become an unexpected voice of moderation, Sturzenegger insists on being a real IMF parrot and is advocating for even more austerity.

I suppose that being acquitted in the Megaswap case (the fraudulent 2001 bond swap that added $38 billion to the debt) must have gone to Sturzenazi's head. The judge based based the acquittal (that was in July) solely on the testimony of one of those indicted in the case, ignoring the mountain of hard evidence against him (documents, minutes from the meetings with banks, commission payouts, etc.).

Somebody should hack the judge's bank account; it probably got a lot bigger sometime around July.

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