Argentina’s “Massa Plan” falls apart: Country Risk exceeded 2,800 points

The timid program announced by the Argentine Minister of Economy in August did not achieve any effective results.

Inflation is becoming more and more violent, the risk premium returned to the highs of July, and retail sales are collapsing month after month.

The credibility and presumed “confidence” that Minister Sergio Massa had managed to recreate since his appointment seems to end. The markets are uncertain about the country’s economic course.

The Country Risk Index reached 2,821 basis points at the end of Wednesday, October 12.

It is an indicator prepared by JP Morgan Stanley which measures the difference or risk premium between the international interest rate of reliable bonds par excellence (such as the U.S. ones) and the debt issued by the Argentine State.

With the government of Alberto Fernández, Argentina became one of the riskiest countries in the world to invest in, surpassing even devastated nations such as Ukraine and Sri Lanka.

Argentine bonds must pay a surcharge of 28.21% over the international interest rate.

The “Massa effect” had slightly reduced the risk premium between July 25 and 29, when his imminent arrival at the Ministry of Economy to replace Silvina Batakis became evident.

The markets anticipated possible stabilization measures, but these never appeared, and the JP Morgan index once again reached the highs recorded during the fateful Batakis administration.

The projected inflation for September exceeds the 7% floor according to the government’s own estimates, and private consulting firms anticipate that it will not be able to break 6.5%.

Retail prices substantially increased by 7.4% in July and 7% in August.

Massa’s program did not achieve any result in terms of inflation. The REM expectations average places year-on-year inflation above three digits by the end of the year, a value not seen since 1991.

The resurgence of inflation has eaten into the purchasing power of wages, and the economy could enter a recessionary phase for the second half of the year, in line with the drop in consumption.

Retail sales recorded a sharp fall of 3.5% in September, according to CAME’s surveys of 1,200 companies throughout the country.

It is the third consecutive month in which retail sales recorded year-on-year declines, while monthly inflation has exceeded 7% since July.

The stagflation scenario seems increasingly unmanageable for the economic team.

With information from Derecha Diario