In hangover of World Cup fiesta, Argentina’s economic reality bites

NEW YORK/BUENOS AIRES, Dec 21 (Reuters) – Gregorina Victorica, an 86-year-old retiree in Buenos Aires, hailed Argentina’s World Cup victory that lifted spirits in the South American nation and brought joy to people hard-hit by rising prices and economic crisis.

But despite the glow of victory from a dramatic and topsy-turvy final against France, the reality is grim with inflation heading for 100%, tight capital controls, near 40% poverty and fears of more debt defaults on the horizon.

“The World Cup is a huge joy that revives us after suffering from an economic crisis for so long,” said Victorica. “But soon we will have to come back to reality and face the situations that weigh on us every day.”

Argentina’s thrilling win, their first since Diego Maradona lifted the trophy in 1986, brought millions into the streets on Tuesday to cheer on a team led by star Lionel Messi, a release valve for frustration with leaders who have failed to fix the economy for years .

The crowds were so huge and frenzied – with some estimates of 4-5 million people on the streets – that the open-top bus parade had to be cut short and the players transferred to helicopters to fly over the city.

Also Read :  Asian shares slump, dollar firms ahead of central bank rate hikes

But in the hazy hangover of the victory party, the Argentinians are coming back down to earth. The major grain producer, once one of the world’s richest nations, posted annual inflation of 92.4% in November. The prime interest rate is 75%.

Problems with money printing, an artificially overvalued peso, and low foreign reserves are escalating. Investors worry that Economy Minister Sergio Massa, brought in to fix things in August, is not making enough policy reforms with a general election at the end of next year in mind, which the government fears it will lose.

“Masa is just trying to play a mole, he’s desperate not to make any meaningful correction before the 2023 election,” said Ted Mann, senior emerging market equities analyst at AllianceBernstein.

“Under Massa, the Argentinians are incredible box-kickers. They are better at kicking boxes than Messi is at kicking soccer balls.”

Also Read :  China COVID cases rise, hard-hit Beijing districts shut schools


Some Argentinians are more optimistic.

“The World Cup gives us hope and the will to believe,” said Osvaldo Hassan, a 62-year-old businessman from Buenos Aires. “This could be the kick we needed to build consensus and move the economy forward.”

Camila Gotelli, 25, who works in marketing, said the “historic” victory could boost Argentina by attracting more tourism, creating jobs and raising the country’s global profile.

World Cup wins can give a country’s economy a small boost in the coming months, an academic paper from Britain’s University of Surrey has found, helping boost exports.

In the short term, it could also give leftist President Alberto Fernandez a boost. Its popularity has waned due to the impact of the COVID-19 pandemic and economic problems, despite striking a new $44 billion deal with the International Monetary Fund this year.

“For me, it will benefit the government for a few days because people are distracted,” said Carlos Zarate, a 63-year-old trader in the city, adding, however, that once the southern hemisphere summer is over, “reality is going to hit.”

Also Read :  Italy economy minister promises fiscal prudence, lower debt

Last month, ratings agency Moody’s slammed the country, citing rising central bank debt as a risk to financial stability. S&P downgraded Argentina’s already struggling local currency bonds further into junk territory.

Graham Stock, senior strategist at BlueBay Asset Management, saw positive economic developments potentially being triggered by next year’s election, where there is a change of government after the ruling coalition badly lost the mid-terms last year.

But the economic changes weren’t going to happen overnight, and everyone had to get involved, not just the soccer team, said Maria Belen Pereira, 32, an elementary school teacher.

“We celebrate because it represents us as a country, but it was the sacrifice of about 30 people,” she said. “For the economy to change, we all have to make a push.”

Reporting by Rodrigo Campos in New York and Belén Liotti in Buenos Aires; Written by Adam Jourdan; Editing by Alex Richardson

Our standards: The Thomson Reuters Trust Principles.


Leave a Reply

Your email address will not be published.

Related Articles

Back to top button