New York – Ernesto Revilia, Latin America’s chief economist at Citi Research, shows graphs with forecasts. He hopes the world economy will slow down – the United States, like China, will grow below its historical average, that global inflationary pressures will continue, but by the second semester, prices for energy commodities will slowly begin to rise. deflate, though not so much as related to food. When it focuses on the region, it shows inflation charts: Argentina is the only country in Latin America – along with Venezuela – that is not visible. They do not fit the scales.

“Argentina is a macroeconomic outer (atypical) region,” Revilla acknowledges. ᲔᲠᲘ. The economist expects the official exchange rate to jump to $ 160 by the end of the year and reach $ 250 by the end of 2023. On the other hand, it expects relative exchange rate stability in the region as it predicts that the U.S. economy will be. Do not enter a recession, but will have soft access. “If there is hard access, we will see further depreciation of the exchange rate in the region. The rate hike scenario is also putting pressure on the debt market. But now we are continuing the soft access scenario, ”he explains.

– How do you see the situation in Argentina?

– He still has a macroeconomic imbalance diagnosed a long time ago. Especially fiscal deficit. The fiscal situation remains very difficult: it continues to spend more than it earns. This difference is usually covered by the market, but because the markets are closed, it is covered by an issue that is very inflationary. And this puts devaluation pressure on the currency. Our fear with Argentina is that we are moving to a higher inflation regime. We expect 75% inflation by the end of the year, up from 50% a few months ago. Inflation is becoming a problem faster than we expect. And that puts pressure on the exchange rate.

– How important is it to achieve the goals of the International Monetary Fund of Argentina?

– Very important and topical. This is a path that does not guarantee success but increases the chances of a better economic environment. The market is losing confidence that the goals will be achieved. But this is still to be found out. It seems that the IMF, the market and even the population are already waiting for what the next set of reforms will be in the future to achieve the goals. The market is a Wait and seeWe look forward to what will happen with politics and elections next year.

What do you expect from the next government?

– It is difficult to say. On the one hand, we have very deep external shocks. We experience a sequence of shocks that just one of them would be enough to create uncertainty about the future. But we have four: the pandemic, the slowdown in China, the rise in Federal Reserve rates, and the war between Russia and Ukraine. In the case of Argentina, this is even more difficult because the internal conditions mean that there is a great variety of possible scenarios after the elections. It will depend on what policy the new government should follow, but also on the support of the population that will have this policy. There are many scenarios: from the extension of the status quo to deeper fiscal and structural reforms.

What reforms do you see as essential?

– It is obviously a tax issue. This requires a great deal of debate in the public about what is the best way to do this: through more progressive taxes or through spending measures.

“Tax reform requires a great deal of debate in the public about what is the best way to do it: through more progressive taxes or through spending measures.

-Can it be contagious to other countries in the region from the Argentine crisis?

– It is unlikely now, because the economic deterioration of Argentina has been going on for many years. Of the pattern we’ve been looking at for decades, the country has spent a third of that in recession. This has led some of Argentina to become more disconnected from insecurity.

– How do you see the Brazilian elections?

– This is a very important election in Brazil, it is the most important economy in Latin America. But the market is not worried because it thinks that if Bolsonaro or Lula wins, there will be an obligation to continue to improve the fiscal position. But, of course, we have this turn to the left of many Latin American economies, which many political analysts define not as a turn to the left, but as a bypass of the governments of the time and a break with the establishment. There is a lot of time to spend in Brazil, and the main thing, no matter who wins, is the commitment to reduce the public deficit. Like Argentina, they share this, it is the biggest challenge for the economy.

– What do you expect regarding the prices of goods?

-Looking forward, the forecasts could be profitable for Argentina as we anticipate that oil prices should start in the second half of the year as global demand due to the slowdown will be less and there will be more supply. At this price level many manufacturers want to produce and sell. And on the other hand, if the conflict between Russia and Ukraine is prolonged, which could keep prices on agricultural products. This will help Argentina in external terms.

– Beyond the shocks, is this global scenario an opportunity for the region?

Definitely. Latin America has a great opportunity to attract investments that come from more conflict areas. We had a global trend after Trump’s presidency, due to the conflict between China and the United States, but later with the pandemic and now the Ukraine war, these three different episodes go in the same direction, which is a correction. Supply chains and roughly where demand is. Latin America is ideally located because it is a region of peace. It is further away from world conflicts, it is a growing educated region where the level of young people of university age is increasing and it is a region that is not necessarily tied to this or that political pole. It will have huge benefits in the future.

– Argentina is beyond this map, right?

– (laughs) Every country shares some of the benefits and has some challenges.