Argentina Weekly Report

Forecasts 2018: Will Gradualism Continue?

January 5, 2018BancTrust & Co. Research Team
  • We expect 2017 GDP to coincide with the government’s target of 3% by year end, while for 2018 we expect growth to be around 3.5%
  • As it was previously anticipated, the inflation target will not be accomplished and we think it could end around 23% – 2% above our last year estimation. Meanwhile, we expect it to continue its decreasing trend for 2018, and end the year at a range of 15% to 19%
  • 2018 will be a year to take a closer look into the BCRA decision regarding its key monetary policy rate, as foreign exchange lags are turning into a significant issue to look for
  • However, recent announcements on the adjustments of 2018 inflationary goals set a more realistic scenario from the government’s side. Likewise, this announcement quickly affected the FX market which depreciated above the ARS/USD19 level
  • We see with good eyes the path on fiscal deficit reduction. Thus, we do believe the government could accomplish its 4.2% target for 2017 and 3.2% for 2018

This year represented a challenge for Macri’s administration as it was not only the year to start implementing its reforms, but also to prove that it counted with the political backup to implement them. In this regard, mid-term elections meant a victory to Macri’s image as his party demonstrated to have the strength to surpass former president Cristina Fernandez de Kirchner’s intentions, and it also meant that the path to approve the needed reforms was, at least, easier. However, the elephant in the room for the government is the continuous criticism about the level of gradualism, after a difficult 2016 that did not seem to improve, and the biggest fear for 2018 is that planned reforms won’t be enough to overcome it. Nevertheless, there is good news to highlight.

Argentina Weekly Report

The Bittersweet Disinflation Path

December 22, 2017BancTrust & Co. Research Team
  • The BCRA left unchanged the monetary policy rate, trusting in the (too slow) disinflation process that continued in November
  • On fiscal policy, the government used a decree to elevate the amount of public expenditure of 2017’s budget. At the same time, they are trying to add balance through changes to the tax reform and the revamp of the pension system
  • Volatility dominated the ARS trade this week, which saw it drop to the second-lowest level in one month only to then climb to its highest rate in more than a month

The BCRA decided to leave unchanged the 7-day repo rate at 28.75% after what they considered was a “good performance” of core inflation in November. In detail, the National CPI advanced 1.4% m-o-m and now accumulates 21% YTD; but core inflation, once again, continued its way to the 1% threshold that the BCRA set as a goal with a 1.3% m-o-m result. This last result is the same of October and there are no reasons to believe that it could dramatically improve before year-end, meaning that the Central Bank’s goal is more likely to be seen in 2018.

Argentina Weekly Report

Reforms acting like an Economic Booster

December 8, 2017BancTrust & Co. Research Team
  • Reforms approval in Congress started with the Pension Reform, the Fiscal Consensus and the Fiscal Responsibility laws. Advances in this area were considered a reason for Moody’s to upgrade Argentina to “B2” from “B3”
  • Sturzenegger stated that their focus is on 2018 and 2019 inflationary results, as he recognizes that this year won’t make their initial target
  • We detailed the bond issuances that are left until the end of 2017, and we introduce what is expected from the Province of Buenos Aires in currencies different than USD

Since more than a month ago, when the government achieved to capitalize better-than-expected results in the mid-term elections, all the attention has been over the new reforms and the capabilities that Macri’s administrations would show at passing Congress approval, negotiating with both opposition province’s leaders and industrial sectors involved. From our point of view, this area has shown significant progress and this week has several proofs of it. 

Argentina Weekly Report

First Phase of Fiscal Reform: Achieved.

November 24, 2017BancTrust & Co. Research Team
  • We describe the main points of the fiscal pact with 23 of 24 provinces adhering to it, thanks to President Macri’s negotiations that looks for fiscal discipline and demonstrates its political strength
  • The BCRA changed its strategy on monetary policy, limiting the use of Lebacs towards other financial instruments to absorb liquidity at better rates
  • CPI increased 1.5% m-o-m in October and keeps its pace of deceleration, even though still slower than expected by the BCRA

This week, Macri’s government continued moving forward with economic reforms and we would like to emphasize that this is an important victory for the government, which has shown, once again, its renewed political strength to negotiate a delicate issue for the provinces and that allows the current administration to continue with its plans to reform Argentina, even more now that has support in the Congress. Thus, President Mauricio Macri checked the first point of his economic plan which is, as we mentioned in our last Weekly Report, fiscal responsibility by sealing a fiscal agreement with 23 of the 24 governors of the provinces of Argentina. The importance of this deal comes as it represents the start of a widespread reordering of the public accounts in the provinces, which helps them to work from the root the fiscal deficit of the country.

Argentina Weekly Report

Finally, the Reforms are Here

November 10, 2017BancTrust & Co. Research Team
  • President Mauricio Macri released this week its reform agenda for the upcoming years, focusing on generating more income and reducing poverty
  • We take a look at the effect of the government proceeding with this measures, starting from the S&P’s upgrade until the performance in the fixed income arena
  • We described the main points of the so waited Tax Reform while adding our perception about it

Since the middle of this year, we have been very emphatic that the government has been saving its reform agenda for after they assured that they enjoyed the public’s confidence and support. In this regard, and almost two weeks after the elections, President Mauricio Macri has finally delivered its plans to reform Argentina in the following years, which are framed in three “Basic Consents”: 1. Fiscal Responsibility, inflation, and taxes; 2. Job Creation and pension reform; and 3. The Re-foundation of the Republic and the institutional quality. Getting into more specific grounds, the aims of Macri’s government are to migrate to a model where they spend less than what they collect, to generate not only more jobs but better ones, and to include reforms in the justice and electoral systems. Now that these guidelines are of public knowledge, we can only wait for action in the Parliament to get new bills to be approved, like the case of the tax reform – which we will be discussing later. However, rating actions did not take long to respond to this new advance.

  • Tuesday, January 16 2018


    - Yesterday the President Nicolas Maduro gave its yearly speech which should be something close to the state of the union and that according to the constitution should be presented in front of the National Assembly. However, this year and arguing the illegality of the National Assembly, the decision was to give his speech in front of the National Constituent Assembly. In detail, more than a state of the union this was one of the usual speech of the President with not much data to collect. Among

  • Monday, January 15 2018


    - The dialogue meeting held in the Dominican Republic between members of the opposition and the government last weekend culminated again without any results. International mediators indicated that although some agreements were reached, several points remain pending and both parties will meet again this Thursday, January 18. In our opinion, it was expected that results would not be achieved,as we have been saying we believe that the most likely to happen is that the negotiation rounds will culmin

  • Friday, January 12 2018


    - The National Electoral Council (CNE in Spanish) announced that it has approved the schedule for the validation of political parties that did not participate in the last municipal elections which it will take place on 27 and 28 of January. The process will be carried out to comply with the order of the National Constituent Assembly (ANC), which has as its sole purpose to be another obstacle for the opposition. We believe that at the moment the attention is focused on the negotiations in the Dom

  • Thursday, January 11 2018


    - The situation regarding Venezuela’s debt with Brazil received yesterday two mixed updates, as the Brazilian Ministry of Finance reported that the first paid an old debt but that it is still in arrears with another payment. In detail, the ministry informed that Venezuela paid USD262.5mn – corresponding to the May-August period of 2017 – on 5 January as part of their commitments under the Reciprocal Credit and Payments Agreement (CCR), which is part of the benefits of the Latin American In


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