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The international scenario is becoming more complicated for Argentina. The truth is that the American economy is showing a growing fiscal deficit and the prospects presented by the candidates are not encouraging. China is also far from being a high-growth economy that demanded large quantities of commodities. Today, it is an economy that is growing slowly and has significant financial risks in terms of real estate. However, in the medium term, our country has some attractive opportunities that could be taken advantage of in the coming years if we perform correctly.
In the short term, the international scenario does not seem to be the most attractive for Argentina. In general, our country tends to function better with low interest rates and high commodity prices. However, this does not seem to be the reality for the coming months or even for a good part of 2025. Although the Federal Reserve is expected to begin lowering the monetary policy rate, the truth is that we are faced with a North American economy with a strong fiscal deficit, which could exceed 6% of GDP in both 2024 and 2025. A deficit that has not been seen since the pandemic. Neither Donald Trump nor Kamala Harris are considered austere candidates, so the outlook is not attractive in terms of public accounts. In the coming years we could see an abundant supply of the US Treasury securities needed to finance the State and, as a consequence, prices of these bonds will tend to fall and long-term interest rates will rise.
That’s why, Although the Fed is expected to begin a process of lowering short-term rates, the truth is that this could be long and shallow. In general, in the US, if fiscal policy tends to be expansionary, monetary policy tends to be neutral or contractionary as long as there is no economic crisis. Since this is not the current situation, it is likely that the Federal Reserve will lower rates slowly and little by little. Unless there is an economic or financial crisis, the interest rate floor will most likely remain above 2% per year.
The future will probably be one of high rates in both the short and long term. Although the short-term rate is likely to be lower than the current rate, it cannot be ruled out that the long-term rate will be higher. That will depend on the fiscal policy of the next US government.
Besides, China’s expected growth for the coming years is between 3% and 4% annually, which is low by its standards. Furthermore, let us remember that China is the main consumer of commodities globally. Low growth in China means we may have low growth in demand for commodities such as soybeans, wheat, corn, copper or oil.If we add higher rates to this, we may find ourselves in a more negative context for the prices of this type of goods.
As far as the region is concerned, We find ourselves in a Brazil that has a very high fiscal deficit and that sooner or later will have to carry out an adjustment program.which could lead to further weakening of growth in our region.
This global landscape can present some challenges. However, it is also true that, in the medium term, Argentina has some opportunities, such as the development of the energy sector, which is very relevant today even from a geopolitical point of view. The same is true for Argentina’s traditional agricultural sector or the mining and high-tech sectors. The truth is that global trade is being reorganized and this opens up opportunities for countries like ours.
The author is director of OJF
Conocé The Trust Project
