In Argentina government measures aimed at eliminating microeconomic imbalances and distortions had depressive effects on domestic demand, leading the economy into recession in 2016 (-2,3% in real terms). Last January, the EMAE economic activity indicator returned to positive territory (+1%), signaling that the depressive effects of the adjustment measures are wearing off and the economy has returned to a growth path. The most recent analysts' estimates indicate that Argentina's GDP will grow by +2,9% this year and +3,3% in 2018. At the same time, as of May 2016, the Central Bank began a process of rate reduction: the 7-day interbank rate fell from 38% to 24,75% following the last cut made at the end of November. Subsequently, the renewed pressure to depreciate the exchange rate and the new inflationary pressures led the Monetary Authority to interrupt its easing action, arriving last April to raise the reference rate to 26,25%.
In the Buenos Aires area, last December the trend rate of inflation was 41%, while the average for 2016 was 41,2%. This year new upward pressure on prices will come from the new tariff adjustments; However the trend is expected to slow down significantly in the final months of 2017, while remaining above the upper limit of the new target range (12%-17%).
Starting in 2011, with the start of interest payments on restructured defaulted securities, the current balance went into deficit. The current deficit thus contracted to 15 billion dollars, from 16,8 billion in 2015. In the last year, foreign exchange reserves have more than doubled, reaching 45,6 billion. The reserve figure compares with an estimated foreign financial requirement of 2017 billion in 61 and an external debt of approximately 160 billion (31% of GDP). At the end of 2015, the stock of foreign assets of residents, especially deposits, exceeded liabilities, mainly FDI, and the net financial position was positive by 55,5 billion (9% of GDP). Part of these funds is now returning, taking advantage of the tax amnesty granted by the government for capital held abroad. In 2016, the primary public deficit as a ratio of GDP, equal to 4,6%, was below the target of 4,8%, while this year the Government has set a target primary deficit of 4,2%. Over the past five years, the public debt ratio has risen by 15 percentage points to 51% in 2016, with around 70% in foreign currency. Thus, Argentina's foreign currency sovereign debt, although still considered highly speculative by the rating agencies (B for S&P, B for Fitch and B3 for Moody's), has been affected by improvements in valuations in the last year.
If we go to neighboring Brazil, data for 2016 on trade with the rest of the world, reported by Intesa Sanpaolo Study and Research Centre, show a drop in the dollar value of both imports (to 137,6 billion, -19,8%) that of exports (185,2 billion, -3,1%). The value of trades was also conditioned by the trend in the exchange rate of the real which in 2016 saw a depreciation against the dollar of 6,9%, as well as by the prices of the main raw materials and by the trend in domestic demand. Commercial exchanges are mainly with Asian and American markets, in particular with China, USA, Argentina and Germany, where Europe holds about 24% of the total traded. Italy ranked 6th among major suppliers and 9th among customers, with a share of around 3% in imports and 2% in exports.
With reference to bilateral trade with Italy, based on the data ISTAT in 2016, Italian exports to Brazil fell by 17,1% and reached 3,2 billion euros, while imports grew by 1,0% (3,2 billion). For our country, the net balance of exports was negative for agricultural products, wood, paper and printing, minerals, textiles and clothing, metals and food products, while it was positive for mechanical machinery, means of transport, pharmaceuticals, chemicals and Electrical devices. In this scenario, the stock of FDI entering Brazil at the end of 2015 amounted to 486 billion dollars (27,9% of GDP) and the major investors were precisely the European countries (Italy ranks 9th, with 3,3%), although many with the role of transit markets: the main destination sectors are represented by manufacturing, finance and mining.
The Special Zones established in Brazil allow companies located there to obtain tax and administrative benefitsand are divided into three categories: export-oriented ones (located near neighboring countries with the hope of developing border areas), particular industrial sectors and the development of technologies. The Brazilian industry sees the prevalence of chemistry and processing of petroleum products, agri-food, means of transport, machinery and metalworking. During 2016, the industrial production index saw a further slowdown compared to the previous year, albeit at more contained levels, settling at -6,8%. However, since last October there has been an improvement in the annual change, which reached a positive growth rate in December (+0,8%).
