Government Response

Current Account Deficit: reduction in commodity prices and low competitiveness

Unfavorable exchange rate for export Export taxes on agricultural products High inflation
Nestor Kirchners term Current Account Surplus Fiscal Surplus High foreign reserves

Fiscal Deficit: reduced fiscal space on the policy front

Taxes form more than 40% of GDP

Diminishing Foreign Reserves

Chronic energy deficit, energy imports for 2013 at $ 6.2 Bn Monetization of fiscal deficit

Cristina Fernandez de Kirchners term Current Account Deficit Fiscal Deficit Low foreign reserves

Political Instability: decreased confidence in the economy

Intra-party factions Credit rating CCC+ (S&P), sovereign default in 2002 means ostracized from credit markets

Government Response
2012: Registrations in Pesos to prevent dollarization May 2013: confirmation that the government will not devalue currency

Limits on dollar purchase responsible for a thriving black market

Dollars hold value and protect against inflation

Recent measures:
Central Bank defends currency Hike in interest rates Erased limits on dollar purchases Taxes on overseas Dollar spends reduced scrapped two days later Money supply growing at 25% Warned businesses against unpatriotic pricing