Argentina’s primary fiscal surplus broadly unchanged

We expect the government to meet the fiscal deficit target this year.

Talk of the Day  

The primary balance remained almost unchanged from a year earlier. The treasury posted a primary surplus of ARS 3.9 billion in January, from ARS 3.6 billion in the same month one year before. As a consequence, the 12-month rolling primary balance posted a deficit of ARS 403.8 billion in January, from ARS 404.1 billion in the previous month. In terms of GDP, we estimate the deficit remains at 3.9%. Total revenues grew 19.3% YoY in January; however, excluding the one-off penalties collected in 2017 as part of the tax amnesty program, revenue growth was 27.7%. Primary expenditures rose 19.5% YoY, as higher pension payments (35.1%), social benefits (28.8%) and wages (20.4%) were partly offset by a 40.1% reduction in capital expenditures. Subsidies increased by just 1.9% YoY in January. In real terms, primary expenditures fell by 4.4% and total revenues dropped by 4.6% (an increase of 2.2%, excluding the above mentioned extraordinary revenues).

We expect the government to meet the fiscal deficit target this year. Last year, the treasury posted a deficit of 3.9% of GDP, 0.3% lower than the official target of 4.2%. The government’s goal is to reduce the primary deficit to 3.2% of GDP this year. Excluding tax-amnesty revenues in 2018, this would imply a fiscal deficit reduction of 1.1% of GDP. In our view, the recent changes in the pension-adjustment formula, continued efforts to slash subsidies and higher tax collection due to the expected economic recovery will play a key role in achieving further fiscal consolidation. ** Full Story here.

Day Ahead: The trade balance for January will come out at 4:00 PM (SP Time). We expect a trade deficit of USD 700 million, above the consensual expectation of a USD 557 million deficit. If our forecast is correct, the rolling 12-month trade deficit will rise to USD 9.1 billion.


We believe that compromise is within reach in the NAFTA renegotiation process, despite the thorniest demands of the U.S. negotiation team. In the dispute settlement, the road to compromise will likely be paved by a reform of the investor-versus-state mechanism (Chapter 11) and the elimination of the “global safeguard exclusion” provision. Regarding rules of origin, although Mexico and Canada are unlikely to give in to the demand for a (previously inexistent) 50% U.S. content requirement, there is greater flexibility to increase regional content at the expense of suppliers from the rest of the world. We believe there will be a moderation in the U.S. demand to impose seasonal windows on agricultural goods as one of Mexico’s strongest allies (the U.S. Agriculture sector) weighs in. Moreover, the U.S. government seems to be taking a step back on the sunset clause proposal, perhaps along the lines of Mexico’s counterproposal (i.e., periodical reviews without the threat of undoing the agreement).

Our base case is that a NAFTA deal will be reached during the first half of this year, so talks will likely overlap with Mexico’s presidential campaign season, potentially adding noise to the renegotiation process. The Mexican Senate will recess in May, but special commissions will continue to operate and could ratify the renegotiated NAFTA agreement anytime until the last day of August 2018 (before the new Congress assumes office on September 1). ** Full Story here.

Fuente: ITAU

Leer más Informes de:

Finanzas Sector Público / Fiscal