Page 46 - 2024 Summit of the Americas

INSIDER

Argentina: A Hundred Days of Milei

Inflation slows in South America’s second largest economy, but economic outlook
still shaky An economic overview by John Gallagher in Buenos Aires

At the time of writing, Javier Milei being exchanged at around 1000 Pesos, showed increases for the last three months
has been President of Argentina for one increasing to 1250 Pesos in mid-January. compared to the same period 12 months
hundred days. There have been quite a few This has now fallen back to 1030 and the ago. Perhaps tickets had been bought
changes in the country since he took over exchange rate gap has reduced to around before the devaluation was announced and
in December from the Alberto Fernandez 20% - whether this is due to successful we may have to wait another month or
/ Cristina Fernandez Kirchner controlled economic measures and a deliberate policy two to see a negative effect. With inflation
government. Milei has been trying to rush not to print Pesos to finance deficits, no slowing down and the exchange rates
laws through to deregulate the economy one is sure. But the markets seem to be stable, analysts are saying Argentina is no
and make life better for the citizens, but supporting his policies so far. longer the bargain country it was last year,
the opposition and the trade unions are and overseas visitors may not be rushing to
trying to prevent changes to the status quo. Impact on Duty Free spend vacation time.
Everyone agreed that this would all take a When the gap between the official The Argentine government announced
lot more than 100 days and a large amount and grey market exchange rate falls there last week that it has signed an open skies
of patience from the electorate. Pessimists is a direct effect on duty free sales in agreement with Brazil. This is clearly
argue that the government will need 100 Argentina. Argentine residents who took good news for airport retail as airlines
years to get the economy going again. advantage of the official exchange rate will now be allowed to operate new
Argentina’s economy continues available at Argentine-based airport and services and frequencies without seeking
to struggle, but inflation appears to be border stores when using local credit permission. Argentine low-cost airlines
slowing. The monthly figure is now down cards are purchasing less – at the same will clearly benefit, and aviation experts
to12%, a huge improvement compared to time foreign tourists also cut their spend, say that several airlines are looking to start
the +30% figure Milei’s team inherited. especially those from Brazil who were operations in Brazil.
Single digit monthly inflation is now paying in Pesos in notes they had acquired Milei has confirmed that his
expected sometime in Q2, but few analysts in exchange houses. In a recent visit to government intends to sell flagship airline
are prepared to predict how the year will Puerto Iguazu, I noticed that the long lines Aerolineas Argentinas – but the actual sales
end. Remarkably, the slowdown in inflation of Brazilians to get into the duty free shops, model has still to be decided. The company
has been achieved at the same time as common during most of last year, had has historically lost money for several
the government has reduced subsidies virtually disappeared. There is no comment years and the government has indicated that
on transport, electricity, water, and other from operators on what has happened it will not finance a loss-making airline.
public services. to sales, and we are unlikely to get any There is talk of a workers cooperative
With the shadow of hyperinflation official news until Avolta publishes its Q1 with the government suppling initial
disappearing, Milei’s economic team is sales figures. Suppliers, however, have working capital. Local press reports have
now looking at government spending, confirmed that sales are down. also suggested a possible sale to Eduardo
trying to cut the fiscal deficit. Whole At the same time, the change in the Eurnekian; but with his company holding
ministries have been closed and several relative value of the dollar has also put the concession to manage the majority
departments merged. The government is the brakes on cross border shopping for of the country’s airports, this would be
refusing to print money to fund the deficit groceries and other household goods. difficult to get approved through current
or artificially stimulate growth and is Paraguayans and Uruguayans living anti-trust legislation.
instead relying on a positive agricultural close to the Argentine border made Although trade unions have started
performance in the first half to bring much shopping visits a weekly occurrence. Gas organizing strike action to protest against
needed Dollars into the country. prices in Argentina have also moved up the government’s economic program, social
Central bank reserves have increased significantly. But since the devaluation, the tensions have in the main part been absent.
since Milei took over and optimists are relative values have changed, and shoppers Most electors seem to be prepared to give
saying that restrictions on USD purchases are staying at home. the government some time to sort things
may be removed early in the second half of out. However real salaries are falling,
the year. Travel still growing? Open skies ahead and the situation may change if positive
When Milei took office the official So far, the December devaluation results are not seen in the short term. The
value of the USD was 365 pesos. Almost has not affected passenger numbers on government will certainly be hoping that
immediately, he devalued the official rate domestic and international flights. Both they see the green shoots of a revival
to 800 Pesos. The grey market USD was domestic and international traffic numbers sooner rather than later.

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