Argentina unveils $11 bln stimulus package

Argentina unveils $11 bln stimulus package

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Argentina has unveiled a ARS700 billion ($11.1 billion) stimulus package to try to sustain economic activity, avert shortages of food and medical supplies, help companies and protect workers and vulnerable groups affected by the worsening coronavirus crisis.

"These are decisive measures to ensure that economic activity will continue and that Argentine society is protected in a context in which working conditions are going to be different," Economy Minister Martín Guzmán said in a televised press conference late Tuesday.

He said the package would also seek to keep the market properly supplied with essential goods, while also keeping prices under control.

"The situation is dynamic," Guzmán said. "We will be monitoring the situation day by day and we will be announcing new measures."

The government will make ARS350 billion in direct payments to help unemployed workers, pensioners and those on welfare. The measures also include suspending social security payments for companies in the most affected sectors, including airlines, hotels, movie theaters and restaurants as well as manufacturers unable to import raw materials.

The government will put ARS100 billion toward public works projects, including money to build homes and fix up schools. It will also relaunch a program that offers people low-interest loans to build and repair houses. Prices will be capped on key personal hygiene and medical supplies for the next month, possibly for longer, and inspections will be stepped up of retailers to make sure they comply, the Economy Ministry said in a statement.

Another ARS350 billion or so will come from state banks. The central bank will open up a ARS320 billion credit line for companies to borrow at a preferential rate of 26% per year — less than than the 38% benchmark rate — for 180 days to keep their businesses afloat, according to the ministry.

Banco Nación, the largest state-owned bank, will offer ARS25 billion in credits for producers of food, personal hygiene, cleaning products and medical supplies to keep up output. Another ARS8 billion will be made available for companies to buy computers and other technology so their employees can work from home.

The government this week closed schools, international borders, entertainment venues, sports events and national parks until March 31, potentially for longer, and told people to stay home in a bid to contain a spread of the coronavirus COVID-19, which President Alberto Fernández called "an invisible enemy." According to the World Health Organization (WHO), which declared the outbreak a pandemic on March 11, Argentina had 79 confirmed cases of the coronavirus and two deaths as of March 18.

At the news conference, Production Minister Matías Kulfas said the stimulus package is designed to minimize the impact of the virus on the economy, which is in its third year of recession, by protecting the population and its productive sectors.

"The fundamental objective is for products to maintain their prices," Kulfas said. "We understand that today industry has idle capacity. It can produce more. It is perfectly feasible to supply this increase in demand and we will use all the tools available so that speculative practices are penalized."

Argentina was using 56% of its installed manufacturing capacity in January, according to the latest data from Indec, the state statistics agency.

Before closing schools and enacting other measures to slow the spread of the virus, most economists had expected the economy to contract 1.2% this year, according to a monthly survey by the central bank. But with the outbreak, forecasts are grimmer, predicting a drop of up to 3% as people stay at home and consume less.

"If the decrease in global GDP, according to some estimates, will be around 2.5% this year, it is hard not to think of how much we are going to suffer the effects of such a contraction on our shores," Massot/Monteverde & Asociados, an economic consulting firm in Buenos Aires, said in a note to clients. "No matter the prayers of the Pope... nothing will prevent the social ills that we stand to suffer."