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BUENOS AIRES (Reuters) – As Argentina drafts plans to cut its budget deficit to convince nervous investors it can pay its debts, President Mauricio Macri is under increasing pressure to reverse one of his signature policies, cutting farm export taxes.
Treasury Minister Nicolas Dujovne promised to announce measures on Monday to reduce the South American country’s 2019 primary deficit – its borrowing needs before debt servicing – in an effort to stem the slide in the peso, one of the world’s worst performing currencies this year.
Argentina - Deficit - Percent - Product - GDP
Argentina has already agreed to cut its primary deficit to 1.3 percent of gross domestic product (GDP) under a $50 billion International Monetary Fund program inked in June, prompting protests by unions. Now, Dujovne has pledged deeper deficit cuts before traveling to Washington to negotiate with the IMF for speeding up aid.
The return of export taxes plus a sharp reduction in the number of ministries were being discussed at crisis talks headed by Macri this weekend, local media reported.
Government - Deficit - Target - Currency - Percent
The government has not detailed its new primary deficit target or what measures it expects to take to stabilize the currency after a whopping 16 percent depreciation last week, but investors want decisive action.
“The market will likely be expecting a 2019 budget that makes a credible attempt to all but eliminate the primary deficit,” said Jeffrey Lamoreaux, senior analyst at Fitch Solutions in New York.
Markets - Macri - Office - December - Years
He said markets expected Macri, who took office in December 2015 after 12 years of left-wing administrations, to implement a combination of agricultural export taxes and reductions in subsidies and social spending.
“The risk for Macri is that he alienates one of the few segments still behind him,” Lamoreaux said.
Lobby - Pillar - Support - Macri - Competitiveness
The agricultural lobby has been a pillar of support for Macri as he sought to boost the competitiveness of Latin America’s third largest economy. The powerful...
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