Buenos Aires — Argentina’s financial and macroeconomic fragility is worsening, amid uncertainty due to imminent October elections, and the advance of inflation.
According to a private sector analysis, the country’s fragility rose by 6.1% in May with respect to the previous month, reaching a new historical maximum.
The data, which would be a historical record, is from a study prepared by consulting firm PXQ, which is headed by former deputy economy minister Emmanuel Alvarez Agis.
What determines financial fragility in Argentina?
According to the study, the three variables that had the greatest impact on fragility were: the fall in the international reserves of the Central Bank (BCRA), the negative balance of the foreign assets formation account, and an increase in the gap between the official and the parallel dollar exchange rate.
Reserves are one of the main concerns for the country’s economic team, and for that reason Economy Minister Sergio Massa traveled to China in recent days and obtained what he was looking for: to renew and expand the use of the currency swap with that country, by raising the freely available funds from $5 billion to $10 billion.
According to economy ministry sources, ‘free availability’ includes all kinds of financial operations, so that the government could intervene in the exchange market to keep parallel dollars at bay in the run-up to the elections.
When referring to this variable, the report assured that last May reserves again registered a decrease, the fourth consecutive fall, piercing the $35-billion barrier.
Regarding the formation of foreign assets, the report states that last April there was an important outflow of almost $400 million, which represented the highest figure since November 2020.
Meanwhile, regarding the exchange rate gap, another variable that the market follows closely with the movements of parallel dollars, the report states that last month it increased again and exceeded 100%.
This “adds more pressure to the exchange market”, the study points out.