Country risk solves diaries and nothing indicates that trends change



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You can look for a number of reasons to explain why governments that agree with market principles cannot trust or even overreact with commitments made with the IMF, but in principle there are several main issues: the economy in a recession does not generate the resources to pay off debt and Macri is the main responsible for the crisis because of those who are least trusted to advance the country.

Among the main reasons, five can be registered with a high incidence:

* Economic recession The fall of Argentine economic activity is determined by the volume of its domestic market and with the fall in purchasing power of salaries, it is logical that it suffers. In the plans of the Government and the IMF, this reduction in domestic consumption must be compensated by an increase in exports that have not been registered so far. and therefore dollar income is not enough to keep the economy running and produce fewer balances to pay off debt. Tourism, which is supposed to be the fastest to reverse the negative balance of the dollar, is still red and although the number of Argentineans traveling abroad has dropped and the incomes of foreign tourists have increased, the balance has remained red, mainly because Argentina spends more foreigners than foreigners in the country .

* Political uncertainty. Macri is no longer a business face. The market wants a candidate with greater social acceptance and the ability to negotiate with the opposition. They doubt the strategy Marcos Peña. In particular, because of the need to reach an agreement to promote reforms that they consider important to maintain external financing.

* Legal uncertainty. Investigation of causes of corruption that began with photocopies of notebooks Oscar Centeno it does not occur within a clear legal framework and produces brakes on the entry of credit from international banks to finance PPPs, Public Private Property Programs, to carry out public works. Banks have regulatory barriers to lending funds to companies that are being investigated for corruption and despite Government efforts to isolate executives investigated and protect companies, loans do not come.

* IMF risk. Bonds that are due next year are protected by IMF disbursements, which are deducted for the next, when the next government takes over the office. The market knows that the agreement signed by Argentina to reach the fiscal balance in 2019 is very difficult to comply with and will force permanent renegotiation. Also, if the country needs more funds by 2020, the IMF will force progress with tax reform, social security, labor and the state and political conditions not given for this reform to advance in Congress in the election year. Therefore, by sinking the country financially, it is hoped that the next government will be forced to take this commitment to avoid failure.

* Wind ahead. The world is more complicated, with the president of the United States Donald Trump, faced with FED and insisted on commercial war with China. The world trend is to maintain capital flows from developing countries to seek protection in US Treasury bonds. and complicate more access to finance.

In principle, the agreement with the IMF reaches to cover the dollar's need for payment of debt maturity, but in the plan it is always taken into account that the Government also needs to access voluntary financing, something that is currently closed for the country. . Trying to issue debt with a level of state risk above 600 points is equivalent to accepting conditions of default and instead of voluntarily showing the market will understand it as a sign of despair.

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