Regional Pulse: 30 April 2024

Southern Pulse’s weekly review of need-to-know events curated for people who work in Latin America.

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Editor's Picks:

Argentina

Central Bank president travels to China to renegotiate currency swap

On 26 April 2024, Central Bank of Argentina President Santiago Bausili accompanied Foreign Minister Diana Mondino and Finance Secretary Pablo Quirno on a trip to China to negotiate repayments for last year’s currency swap. In June 2023, the previous Alberto Fernández administration agreed to a USD4.9 billion currency swap with China — later increased to USD6.5 billion in October 2023 as the economic crisis deepened — to cover Argentina’s depleted dollar reserves and ensure the economy could continue functioning. The agreement ends in June 2024, and Bausili and Quirno will need to convince the Chinese government to postpone repayments. Argentine-Chinese relations are at their lowest point since Argentina’s return to democracy in 1983 after Foreign Minister Diana Mondino met several times with representatives from Taiwan. The administration’s anti-China stance has put Chinese-funded infrastructure projects in Argentina at risk, including updates to the Belgrano railway connecting Buenos Aires to northern provinces and the President Néstor Kirchner and Governor Jorge Cepernic hydroelectric dams in Santa Cruz province. The Chinese government has invested a total of USD5.5 billion in these projects.

Ecuador

IMF greenlights USD4 billion loan

On 25 April 2024, the IMF announced it was granting a USD4 billion loan to support Ecuador's economic policies over the next four years. About 30% of the loan will be destined to repay previous debts with the IMF. Daily newspaper El Universo noted comments from analyst Alberto Acosta Burneo, who highlighted that President Daniel Noboa’s government has so far exceeded the IMF’s fiscal requirements and recently hiked VAT to 15%. Despite this, analyst Jaime Carrera said that the government might still have to reduce fuel subsidies in the future, or cut government expenditures. Hours later, the Development Bank of Latin America and The Caribbean (CAF) greenlit a USD800 million loan to Ecuador for short-term capital in cooperation with the IMF. CAF comprises both governments and private banks. Ecuadorian administrations have been cash-strapped for a few years now, with former president Lenín Moreno (2017-2021) inaugurating a series of austerity policies during his term. This latest IMF loan was negotiated at record speed, with Noboa kickstarting talks in early March.

Peru

S&P downgrades Peru’s credit rating due to political turmoil

On 25 April 2024, credit rating agency Standard & Poor’s (S&P) downgraded Peru’s credit rating from BBB to BBB-. The new rating is only one step above “speculative grade,” where unstable countries are listed. According to S&P, the government’s political weakness and fragmentation in Congress hinder any prospect of consistent economic growth. President Dina Boluarte has been recently accused of illicit enrichment after allegedly receiving undeclared gifts from Ayacucho Governor Wilfredo Oscorima. S&P expects the Peruvian economy to grow by 2.7% in 2024, mainly driven by the dissipation of the El Ni?o weather phenomenon. The agency said it would improve Peru’s rating over the next two years if the country achieves political stability.

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