Argentina: No choice but devaluation – Wells Fargo

By FXStreet FXStreet (Córdoba) – According to Eugenio Alemán, Senior Economics at Wells Fargo, the results of the presidential elections mean that many necessary changes are likely to happen in Argentina. The economy will be the biggest challenge. The President-elect Macri promised only one exchange rate system. The economist notes that after years of real appreciation in the value of the Argentine peso a devaluation is the only choice.

Key Quotes:

“Perhaps the biggest issue for Macri is timing, as he has come to power at a time when resources are scarce and the fiscal deficit is already higher than 6 percent of GDP. At the same time, Macri comes at a time when the lack of investment in the country’s infrastructure will hinder its ability to grow faster. On the other hand, the need to reinvest in this infrastructure as well as other economic projects gives his administration an opportunity to sell the country to foreign investors.”

“However, the biggest challenge for investors will be the control of inflation and the ability to repatriate the profits of those investments. Structural reforms made during the 1990s have largely been undone. The incoming administration will start liberalizing the economy but this will …read more

Source:: FX Street