the recession continues showing its effects on the different indicators, loss of purchasing power and high interest rates slowed down both consumption and investment, leaving the industry into a tailspin. During 2018 fell 5% but still more concern is the collapse he suffered in the last month of the year: 14.7% less industrial production compared to December 2017.
Given a context no doubt daunting, Filo.News interviewed Leandro Mora Alfonsin, Economist, University Professor and executive director of the Argentina Federation of the timber industry and Allied (FAIMA), on the State of industry and the perspectives which open for an election year. -What ascribe the fall in industry for 2018?
-The fall of the industry is one of the consequences on the real economy from the currency crisis of last year. In this sense, it has to do mainly with the fall of consumption, the domestic market and construction (both work public as private). Also the fact that Brazil, who demand Argentine industrial goods, had not the vigorous recovery that was expected. While there are interesting prospects for 2019 with regard to the growth of the neighboring country, the figure of Bolsonaro casts doubt on increasing Brazilian demand for Argentine products.
The industry is fundamental to the Argentine economy. It is, with over 1,200,000 posts and nearly 20% of the EAP, the main employer, which pays better wages and has lower rates of informality. Each direct industrial position also generates indirect 2.5 – Leandro Mora Alfonsín (@lmoraalfonsin) 5 February 2019 the handicapped main are internists markets sectors. The key is in the situation that are living industrial SMEs. Companies have a brutal fall of consumption and that fall is compounded by a significant increase in costs. It increased the cost rates, financing and also supplies valued at $. Then, if you drop the consumption and increase you costs what you got is lower profitability. With this lower profitability not invertis, you got less use of installed capacity and that results in cancellation of overtime, suspensions and, finally, layoffs. More than 100,000 jobs have been lost in the manufacturing industry for this situation.
Very high interest rate makes it impossible for companies to finance. Given the context, the expectations are very bad so nobody invests but are also needs funding to meet current needs. Let’s go back to the company: If you sell your production and pay you with a check to 270 days you’ve got a problem. You have providers that pay today and deduct the check has an enormous price by the rate. Then, to avoid that cost, companies sell stock below the minimum threshold of profitability for power so plugging financial holes. But it is bread for today and hunger for tomorrow because the next month you have to continue paying salaries and fixed expenses such as rates. -Being December the worst record in industrial production: prospects opens for 2019?
-This year than one would expect, especially in the first quarter, they are so bad numbers like the ones we saw in November and December. I.e., that there will be a continuity in this strong retraction in the first quarter. You are likely to continue falling, but less dramatically, in part explained by the comparison itself: when you compare us to 2018 that are already bad numbers you’ll see that falls will be less brutal, but the fall is going to persist.
Facing a recovery in the second half of the year, when one sees the prospects for 2019 the most optimistic estimate growth of 0.5 percent for the year so it is not a situation “to shoot the ceiling butter”. in what anchor that economic recovery? In the agricultural, in Vaca Muerta, in certain specific areas. The key question is how we do so you spill out in the world of industry and services, the urban world.
When you hear government officials say that there will not be any fiscal stimulus, and that the aim is to fulfil the goals of the International Monetary Fund then lose a little hope that there are mechanisms so that contagion is generated. If the spill expands then the big question that we are doing is: with which companies reach this economic recovery? Can we get with companies and workers on the other side of the shore?
There are even solutions that may not have fiscal cost, as it would a rate differential of emergency credit line, until you finish stabilizing the interest rate, with a percentage of the Bank laces. No fiscal cost but there is no political will to deal with if you want to that discussion now. -The tendency to lower the interest rate can revive the sector?
-There are two things to say here. First of all, to the extent that lower rates will be scope for increased funding. Secondly, should take into account that although ebbing the level in which it is located remains high. Prospects, according to the survey of expectations of market (REM), which advises the Central Bank, is that the rate for June will be around 46%. I.e., that follows on a floor relatively high and hence, it is important to orient any effort or mechanism to improve the productive financing. Above all focused on working capital so that the economic wheel rotates.
-Do you consider that the situation of SMEs with an election year is compatible?
-It is quite daring the Government to be a year of elections with few tools to go through an economic crisis. It must be seen as evolving situation with the passing of the months but there are many fallen arm between the people who strives to open the factories every day.
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