What Should Happen If Macri Does Things Right?

[rickulivi]

Argentina forever has been characterized with high inflation, high fiscal deficits, low productivity, and to much poverty, among other ills. What's the key to lower the poverty rate, lower inflation and increase productivity? Devalue the peso without inciting more inflation. How do you that? That's a magic trick. It MIGHT require a strong recession, enough to inflict sufficient fear in businesses that if they raise prices, their sales will drop even more.

A devaluation without inflation will produce an export boom, an increase in tourism, and a massive investment in new housing construction, which because of its multiplier effect on the economy, will get everyone back at work.

I think the current government has taken the first step in performing this magic trick. That is, they are causing a strong recession with the increases in utilities, transportation and so on. However, the dollar has revalued, which is bad. Will they be able to devalue the peso without affecting prices? We will see. In the meantime, watch was happens to imports in the short run. If they start increasing at a faster rate than exports, that's good news, because it will put a bit more fear in businesses, and therefore, allow a more rapid devaluation.

The Macri government may be able to pull off the magic trick! Keep your fingers crossed and try to keep on to your job!

 

[Ceviche]

An interesting blog for comments from the **elite** experts, on the economy of Argentina

http://mobius.blog.f...-for-argentina/

 

[steveinbsas]

And if he doesn't do things "right" could anything like this happen?...

http://www.msn.com/e...3bLI?li=BBnbfcL

or this?

http://www.shtfplan....r-food_05112016

 

[camberiu]

The Macri government may be able to pull off the magic trick! Keep your fingers crossed and try to keep on to your job!

There are no "magic tricks". There are no quick fixes. Argentina has fundamental structural problems that can only be solved with fundamental structural reforms. Is it politically difficult to pass those reforms? Hell yeah, it is. Yes, it requires building coalitions. It requires difficult negotiations. But there is no way around it. Without fundamental structural reforms, any relief that Marci's policies can bring, will be temporary at best.
If Argentina was an old beat up car with a busted transmission and a blown head gasket, Macri's policies so far would be the equivalent of changing the body paint and fixing the headlights of the car. Sure, it makes the car look better at first, but will not do anything meaningful to get the car back on the road.

 

[Noesdeayer]

Ceviche.
Thanks for an informative link to Mark Mobius of Templeton Emerging Markets Group.The background info on Argentina,although necessary,is a little long for those of us who live here. Nonetheless,the definition of Argentina and Colombia as Frontier Markets was especially interesting to me.as was "Colombia's Tourism Turnaround".I will be returning there in Sept.
Camberiu might find the articles on Brazil worth a read as well.
I imagine that your reference to the "elite" experts was "tongue in cheek".

 

[ben]

If Argentina was an old beat up car with a busted transmission and a blown head gasket, Macri's policies so far would be the equivalent of changing the body paint and fixing the headlights of the car. Sure, it makes the car look better at first, but will not do anything meaningful to get the car back on the road.

I think that a more accurate description might be replacing oil when there's a leak.

Sure, if you don't fix the leak adding oil won't fix much in the short term. But if you don't first add oil, you won't have a car worth fixing by the time you make it home or to the mechanic.