Telecom Argentina has informed Reuters that the USD5 billion investment programme unveiled in January this year has been delayed due to fears over the sharp devaluation of the Argentine peso, which has lost around 50% of its value against the US dollar this year. The recession-hit economy has mired the country in financial crisis (see below), and CEO Carlos Moltini told the news agency: ‘We are still struggling to understand what the size of our business is going to be in 2019. We need a little more clarity before we spend those USD5 billion.’ The executive expects the company to invest around USD1.3 billion this year, but its original investment plan will not be completed by 2020, as initially projected.
In June this year the executive board of the International Monetary Fund (IMF) approved a three-year Stand-By Arrangement (SBA) for Argentina amounting to USD50 billion. The money will be used to restore market confidence, put public debt on a firm downward trajectory, and help to reduce inflation. According to Bloomberg, the Central Bank of the Argentine Republic (Banco Central de la Republica Argentina, BCRA) has given up on inflation targeting after raising interest rates to 60% in August – the highest in the world. It has also been spending heavily to defend the peso, running down reserves by about USD14 billion between April and June.
This week, however, the IMF forecast a deeper-than-expected recession in Argentina. In its World Economic Outlook report, the IMF noted that the Argentine economy is being impacted by a drought that reduced agricultural output, a corruption scandal, higher borrowing costs, and ‘persistent uncertainty over the success of the stabilisation plan’ that underpins the aforementioned bailout.