Marengo: "If inflation continues to fall and activity continues to recover, the Government will clearly have the votes"

In a world marked by economic volatility, Argentina is an atypical case in the region . This is how Fernando Marengo, an economist, explained it: “Argentina is the only one of the main economies in Latin America with a surplus, both fiscal and current account .” This “shield” , according to the specialist, makes it “ less vulnerable to what may happen in the global context .”

For the director of the firm BlackToro, the growing attention of Argentines to the global economy is a positive sign . "Why? As that country risk goes down, we start to look more like a normal economy and as we start to look more like a normal economy, what happens in the world impacts us."

In the talk organized for a select group of investors and businessmen by S&C Investments , he pointed out that the country risk has experienced a notable reduction from “being seven times the world average at the end of 2023, now standing at two and a half times globally and just over one and a half times regionally.”

According to a report, 3.5 minimum wages are needed to live in Córdoba

Marengo stresses that, in order to understand Argentine economic policy, it is crucial to analyze the Central Bank's balance sheet . "We must always return to the Central Bank's balance sheet and understand that what happens in the bank's exchange market, the Central Bank's intervention in the exchange market is a result of what happens with the demand for pesos and the expansion of internal credit in those markets."

Reserves and exchange rate restrictions

Faced with the challenge of accumulating reserves, and despite the favorable context, Marengo warns of a possible obstacle: "The accumulation of reserves will be slower." This is due to the government's strategy of prioritizing the supply of the demand for pesos by reducing government deposits and decreasing the holding of LEFIS by banks.

Public works: they warn that "if disinvestment in infrastructure continues, recovery at the federal level will be limited"

The economist emphasizes that the lifting of the exchange rate restriction is directly linked to the Central Bank's ability to accumulate reserves. "The main restriction to lifting the restriction is the Central Bank's lack of reserves," he said. In fact, the president himself has hinted that the restriction will persist, at least, until the end of the year.

Inflation on the decline and economic recovery

Marengo is optimistic about the near future. “We believe that in the second quarter of this year the inflation rate could be below 2% and that in the second half of the year we could start to see inflation breaking the 1 and 5% mark,” he stressed. As for economic activity, he anticipated growth of over 5%, driven by a “statistical drag of almost 3%.”

Finally, Marengo reflected on President Milei's governability, noting that it will be intrinsically linked to the evolution of inflation and economic activity. "If inflation continues to fall and activity continues to recover, I clearly believe that the government will continue to have popular support in terms of votes ."

In conclusion, Argentina's economy is at a crossroads. Its unique position in Latin America, underpinned by fiscal and current account surpluses, gives it a strategic advantage. However, long-term success will depend on the government's ability to navigate global challenges, build reserves and stay on track to economic stabilization.