The devaluation of the peso against the dollar has not only had a strong impact within the country, but also it resonates in Latin American
The world saw the arrival of Mauricio Macri as a new hope for Argentina, which for decades had been submerged in economic decline. International markets saw the new president as prosperous for trade and the country's economic growth.
Leer en español: Latinoamérica: ¿la crisis argentina es contagiosa?
However, the great devaluation of the Argentine peso against the dollar, the trade deficit and the great economic crisis, in which the country finds itself, has put in trouble not only the Argentine nation, but the consequences affect neighboring countries such as Chile, Brazil, and even Mexico.
The high interest rates of the United States have caused the collapse of several of the currencies of emerging economies around the world. This had a greater impact on the Argentine peso, which, according to the BBC, in the last 12 months has been devalued approximately 52%, followed by the Turkish lira.
To start building the country we want, we have to balance our accounts. Any development strategy needs to start there, with a State that spends less than it enters.- Mauricio Macri (@mauriciomacri) September 3, 2018
The Argentine peso’s fall has brought great consequences to President Macri. It has triggered a series of events that have only worsened the situation. One of the effects, for example, is the loss of confidence of international investors, which shows a concern to the government's capabilities in terms of managing their finances and meeting their debts.
In addition, according to BBC, Argentina's current inflation is at 30% and the Argentine central bank, in an effort to control and stabilize the argentine currency, has raised its interest rate to 60%. One of the highest rates in the world. Consequently, high interest negatively affects consumers and entrepreneurs who need or seek credit in the country.
The executive director of the International Monetary Fund, Christine Lagarde, did not thnik that the contagion was going to extend to several countries beyond those that currently fight against investors. However, she did clarify that these things can change quickly.
A contagious effect of the Argentine crisis has been evident in recent weeks. Not only has it spread to different financial institutions within the country, but also it has begun to affect other countries.
In Argentines, there is growing awareness that we can not continue to spend more than we have, let alone coexist with corruption.- Mauricio Macri (@mauriciomacri) September 3, 2018
According to an analysis by JP Morgan, Brazil has been one of the economies most affected by the Argentine crisis. Several of its companies export large quantities to Argentina and have been taking the risk on their balance sheet.
Alpargatas, for example, is one of the big companies, owners of the famous Havaianas sandals, which gets 19.1% of Argentina's income and, due to the devaluation of the Argentine peso in the second quarter, prices were readjusted, which led to a reduction in their sales.
Alpargatas, Ambev, Klabin, and Braskem are the big Brazilian companies that have been most affected by the crisis in the neighboring country.
In addition, according to the newspaper El Cronista, the Brazilian automotive industry has also suffered. Anfavea, the chamber that gathers the automakers in Brazil and of which Argentina is the destination of 70% of its exports, sent 344,000 vehicles to the southern country, a figure 4% lower than in 2017 and which expects to be further reduced.
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Fabrizio Panzini, in charge of Foreign Affairs of the Brazilian National Confederation of Industry (CNI, in Spanish), clarified that in previous crises, Brazil has not hesitated to look to other markets to compensate for its losses.
The tourism sector in Mexico has also been affected during this quarter, since Argentina is the third country that has more travelers to the Central American country after the Americans and Canadians. According to El Cronista, 298,000 Argentines entered the first half of this year, and a large reduction in the entrance is expected.
According to Armando Bojórquez, president of the Confederation of Tourist Organizations of Latin America (Cotal), Argentines are not only stopping buying trips due to the low purchasing power of their currency, but a large majority of tourist agencies are not accepting credit cards as a method of payment due to the fear that consumers will default.
Finally, the Argentine crisis also crossed the cordillera towards Chile. President Sebastián Piñera looks with concern at the economic movements of the neighboring country.
According to the newspaper Biochile, the Chilean stock market fell on August 30 due to the number of Chilean firms operating in Argentina that have been affected by the crisis and the devaluation of the peso.
The SPCLXIPSA index, which groups the major shares of the Santiago Stock Exchange, lost 3.5% in August. Other companies such as Latam Airlines fell by 2.46% and those of Enel Americas fell by 5.07%.
LatinAmerican Post | Valentina Moya
Translated from “Latinoamérica: ¿la crisis argentina es contagiosa?”