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Economist: Argentina's Economic Chain is Broken, Credit Fails to Drive Growth
🇦🇷 Argentina /Economy & Trade

Economist: Argentina's Economic Chain is Broken, Credit Fails to Drive Growth

From Clarín · () Spanish

Translated from Spanish, summarized and contextualized by DistantNews.

At a glance

Interview Named sources Context piece
  • Economist Marina Dal Poggetto criticizes Argentina's economic chain, stating credit is not driving consumption or investment.
  • She notes the government has adapted its economic plan, particularly since the Central Bank resumed buying dollars.
  • Dal Poggetto highlights a divergence between dynamic sectors like energy and mining, and struggling sectors like commerce and construction, questioning the model's sustainability.

Argentina's economic transmission mechanism is broken, with credit failing to stimulate consumption and investment, according to economist Marina Dal Poggetto. She observes that the government's economic plan has undergone significant adaptations, especially since the Central Bank began purchasing dollars again earlier this year. Dal Poggetto acknowledges the initial fiscal adjustment was necessary but questions the accelerated interest rate cuts and the use of an exchange rate anchor for disinflation, which she believes led to a loss of external surplus before the Central Bank could recapitalize.

The transmission chain of the economy is broken; credit is not driving consumption and investment.

— Marina Dal PoggettoDescribing the current state of Argentina's economy.

The economist points to a concerning economic duality. Dynamic sectors such as energy, mining, agriculture, and finance, which constitute 15% of the product and 9% of employment, are performing well. However, more representative sectors like commerce, linked to industry and construction, are declining. This divergence, Dal Poggetto argues, prevents overall economic activity and employment from rising. She expresses concern about the sustainability of this model, noting that the "new economy" generates significantly less tax revenue than the old one, a point she acknowledges the government may not see as a problem.

My army never retreats, it only turns around and moves forward.

— Unnamed source, applied by Marina Dal PoggettoTo describe the flexibility of the Milei government's economic strategy.

Dal Poggetto likens the government's flexibility to that of the Chinese, stating, "My army never retreats, it only turns around and moves forward." She anticipates that consumption will remain stagnant, with only modest growth possible under the current model, which relies on exports and investment driven by schemes like RIGI. While exports are performing well due to low imports amid economic stagnation, this is insufficient for genuine economic expansion. The situation is exacerbated by real wages remaining largely flat and formal employment declining, partly offset by informal job growth.

Consumption is stuck and can grow little considering the logic of this model: growth based on exports and investments driven by the RIGI scheme.

— Marina Dal PoggettoOn the prospects for consumer spending in Argentina.
DistantNews Editorial

Originally published by Clarín in Spanish. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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