Last week there were the United States presidential elections and finally donald trump managed to prevail against Kamala Harris and the Republicans will govern another four years. Thus, the protectionist policies with possible tariffs in international trade and a strengthened dollar At a global level, they will set the agenda, but specialists are also developing how this new world map will influence the local economy.
From Romano Group In their analysis after the elections they named two topics that raise “certain alarms” regarding the local impact.
- Country Risk: “At high levels of US interest rates, it becomes a less benevolent scenario for financial management of the Argentine debtunderstanding as such a friendly exchange, refinancing, etc. since it is attractive to be placed in safe assets (fly to quality) where Argentine bonds could a priori appear to be lagging behind in said flow.”
- Commodities: “With a strengthened dollar worldwide, primary products could have weak prices since they would become more expensive compared to the world, which means an important alarm for Argentina, where its source of dollars still depends heavily on commodities (especially agriculture). Furthermore, given the expectations placed on the Argentine energy trade surplus, “Any drop in their prices generates uncertainty about the flow of dollars going forward.”.
As for the topics that could be positive, from this report, they believe that a victory for the Republican Party, and more particularly for Trump, It can place Argentina in a beneficial position in geopolitical terms with the leaders of both countries having some common ideas and demonstrating some sympathy for each other..
“We believe that in part this was why Argentine assets rolled in an interesting way to the rhythm of the Republican’s victory, being emerging assets. We do not fail to highlight the interest of Javier Milei’s government in terms of its alignment with the United States. This also places favorable expectations regarding the management of the debt with the IMF. where the American president could exert some influence for its restructuring and even the arrival of fresh funds,” they analyzed.
Fiscal deficit, wars, and trade war
Some studies, such as the one carried out by the University of Pennsylvania, indicate that The fiscal cost of the possible measures to be carried out would be US$5.8 trillion (US trillion) in 10 years, thus leading to a deficit of US$4.1 trillion for the same period.. This, however, would be accompanied by GDP growth in the first years and with improvements in terms of income for workers (via tax reduction).
“This would leave Argentina as one of the few countries with a fiscal surplus, providing greater solidity to its public accounts and consequently to its country risk levels. Despite this, we believe that although the country risk has some scope to the low, “We are waiting for key factors such as the exit of the stocks, consolidation of economic growth and debt management going forward.”they explained from Roman Group.
In addition to this, they highlighted that High deficit levels for the US administration mean higher levels of long rates, since it needs an increasingly higher rate to finance these amounts, with already high debt levels. “This, as explained, is not necessarily beneficial for Argentina,” they added.
Another key point to analyze is The increase in tariffs could harm US inflation levels. “This would mainly impact Chinese imports, with Argentina highly dependent on the Asian giant. At the same time, it is not the same China as 2018, where today it is somewhat weaker in terms of activity, which means A restriction on their exports could weaken their activity, their income levels, postponing consumption and thereby affecting the demand for commodities.“he explained Roman Group.
From the same report they highlight a way out of this situation: to solve this higher cost on China’s part, it could devalue its currency, but it would entail a cooling of its activity.
Regarding war conflicts, one of the campaign’s pillars was to end them, but this consulting firm maintains that “in an increasingly complex globe, It could bring greater volatility in prices also in the economic future in weaker economies such as Argentina (mainly by flows)”.
Source: Ambito
