Argentina “erosion” may spur change: Redrado
Argentina’s ruling party’s grip on power risks crumbling in the run up to 2015 presidential elections, analysts say, amid a sharp deterioration in the economy the country’s former central bank president blames on wrongheaded policies.
Argentina's economy has weakened sharply in
recent years, Martin Redrado, a former governor of the
country's central bank, told LatinFinance in an
Mounting pressures on fiscal deficits, foreign
exchange reserves, the exchange rate and trade balance could
push the economy to a tipping point analysts say would have
far-reaching political consequences.
"There has been a continuous erosion of the
four pillars that have been the pattern of this decade,"
Redrado, who is now a consultant advising opposition
The central government and provinces ran fiscal
deficits last year for the first time in 15 years, Redrado
said. This is despite the government’s use
since 2010 of the central bank as a "checkbook" for spending
– a fact that prompted Redrado’s
departure as head of the bank.
The government has used international reserves
– intended as a buffer against exchange rate
volatility – to pay down debt. Argentine exports
abroad now face stronger headwinds.
"Inflation has eaten up any competitive
advantage that Argentina has had," Redrado said. "Without a new
economic approach this process will continue to yield mediocre
growth," he said.
Redrado expects the economy will grow by 2.3%
this year, slowing to 2.1% next year due to a lack of
Recent results in primaries before October
congressional elections have emboldened the opposition
– and prompted speculation on its prospects for 2015
"The president continues to ignore [the August
11] primary election defeat (26.3% of the national vote) and
the new political reality it implies," Barclays wrote, noting
little change in tone following the vote. It called the results
an "electoral blow" and the overall level of votes for
Kirchner’s FPV party a good proxy for
"The election result decreases the possibility
of the president being re-elected," Barclays added. "This
should be seen as positive for investors, as it implies that a
constitutional amendment [allowing Kirchner to stand for
re-election] is not politically feasible and that political
change should be expected in 2015."
Jeffries said the event likely marks the
beginning of a positive shift in credit risk perception for
"The presidential elections in Argentina are
not until October 2015 but the current voting tendencies
suggest declining political capital and limited policy
flexibility," it wrote in a research
The full interview with martin Redrado will be published this
month in LatinFinance’s 25-Year