In late January, President Alberto Fernández participated in this year’s virtual gathering hosted by the World Economic Forum, normally held in Davos, Switzerland. From his cozy office at the Olivos presidential residence, the Peronist leader boasted about his administration’s response to the one-two punch of a global pandemic and Argentina’s chronic economic decrepitude, worsened by Covid-19’s global impact. The president highlighted how his Peronist brand of social-democracy managed to focus on “the discarded, those most vulnerable,” claiming it is high time to “leave behind this brand of hapless capitalism.” There seemed to be a certain disconnection with reality when Alberto touted the rapid recovery of the Argentine economy, which had seen some five months of sustained and robust economic growth, according to the president.
With one of the world’s highest inflation rates — which is currently on the rise — and almost out of foreign exchange reserves, Argentina’s government is looking at an array of price controls in order to keep a lid on the economy at least until October’s midterm elections. Lay-offs are prohibited by law. To a certain extent it feels as if they are once again covering the sun with their hand, so to speak, repeating failed experiences of the past and only kicking the can down the road. At one point in the president’s speech, he asked global leaders to push an “avant garde agenda, consistent with 21st century [goals],” which seems contradictory with certain pieces of legislation his administration has passed including a “home office law” and a new tax regime for the “knowledge economy” that only penalizes the private sector.
Whatever his intentions may be, it doesn’t feel as if Alberto is pushing a 21st-century agenda. Traversed by a global pandemic, and already two years into a recessionary cycle of stagflation, the government relied on printing copious amounts of pesos to finance emergency payments to individuals and corporations, while freezing public utility bills and using regulation to cap price increases in rentals, food and beverage, and telecommunications, to name a few. Yet, inflation jumped more than 36 percent over the past 12 months — marking a steep decline from 2019’s 54 percent with which Mauricio Macri left office — substantially outpacing wages. They didn’t seem to have a choice but spend being locked out of international debt markets.
While Economy Minister Martín Guzmán has signalled his intention to gradually close the fiscal deficit reducing subsidies in order to normalize energy costs, his government has already backtracked on increases, as it did with retirement and pension payments, putting further stress on the state coffers. Interestingly, these moves were attributed to Vice-President Cristina Fernández de Kirchner, a 21st-century character stuck in the ideological struggles of the 1970s. It was during CFK’s second presidency when the macroeconomic variables got out of whack, as she relied on increasingly stricter capital controls to keep the subsidies flowing, heating up the inflationary forces to the point where she intervened the official statistics bureau, INDEC, in order to try and tame expectations.
In order to imagine an avant garde agenda worthy of the 21st century, Argentina needs to fix its 20th-century problems. According to Federico Sturzenegger, head of the Central Bank
during the first half of the Macri administration, inflation is a revenue tool used by the government. In a column in Perfil, the use of the “inflation tax” will help the Fernández-Fernández administration rake in 1.1 trillion pesos, which, together with myriad taxes, dollar-denominated bond selling, and the one-time wealth tax, will allow it to cover its financing needs in 2021. “It helps that our society is much more concerned over the costs of lowering inflation than the costs of inflation,” Sturzenegger added. Using inflation to “dilute” or “licuar” costs and savings is the oldest trick in the book, and it hurts those in the bottom of the socio-economic ladder the most, as the former Central Banker points out. “Avoiding an immediate macroeconomic crisis doesn’t avert a credibility crisis that will sink investment rates to their lowest level in years, making growth impossible and pushing many Argentines to leave the country, taking with them their businesses and human capital.”
It must be noted that Alberto’s pan-Peronist Frente de Todos front inherited an imploded economy from Macri and his Cambiemos coalition. Macri promised it would rain dollars in the form of foreign investment and that inflation and poverty would tend to zero. While he received a ticking-time bomb from Cristina, he initially seemed to have disarmed it, only to see the economy blow up in his face at the first instance of financial tension in 2018. It was all downhill from there. And after that we had a global pandemic.
A recent report suggested Alberto is pushing a global statesman agenda, trying to align himself with Germany’s Angela Merkel and France’s Emmanuel Macron, along with Pope Francis. And while that sounds noble, Merkel and Macron defend multilateralism while their European Union is considering banning vaccine exports in the face of shortages and delays. If Alberto’s administration was able to put Argentina on a sustainable path to economic growth with inflation trending downward, he would leave his mark on history. It seems unlikely, though, when their response to inflation is price controls and pointing the finger at “speculators.”
World Bank sees ‘significant’ inflation risk from high energy prices
Energy Prices are expected to inch up in 2022 after surging more than 80% in 2021, fueling significant near-term risks to global inflation in many developing countries, the World Bank said in its latest Commodity Markets Outlook on Thursday.
The multilateral development bank said energy prices should start to decline in the second half of 2022 as supply constraints ease, with non-energy prices such as agriculture and metals also expected to ease after strong gains in 2021.
“The surge in energy prices poses significant near-term risks to global inflation and, if sustained, could also weigh on growth in energy-importing countries,” said Ayhan Kose, chief economist and director of the World Bank’s Prospects Group, which produces the Outlook report.
“The sharp rebound in commodity prices is turning out to be more pronounced than previously projected. Recent volatility in prices may complicate policy choices as countries recover from last year’s global recession.”
The International Monetary Fund, in a separate blog https://blogs.imf.org/2021/10/21/surging-energy-prices-may-not-ease-until-next-year, said it expected energy prices to revert to “more normal levels” early next year when heating demand ebbs and supplies adjust. But it warned that uncertainty remained high and small demand shocks could trigger fresh price spikes.
The World Bank noted that some commodity prices rose to or exceeded levels in 2021 not seen since a spike a decade earlier.
Natural gas and coal prices, for instance, reached record highs amid supply constraints and rebounding demand for electricity, although they are expected to decline in 2022 as demand eases and supply improves, the bank said.
It warned that further price spikes could occur in the near-term given current low inventories and persistent supply bottlenecks. Other risk factors included extreme weather events, the uneven COVID-19 recovery and the threat of more outbreaks, along with supply-chain disruptions and environmental policies.
Higher food prices were also driving up food-price inflation and raising questions about food security in several developing countries, it said.
The bank projected crude oil prices would reach $74/bbl in 2022, buoyed by strengthening demand from a projected $70/bbl in 2021, before easing to $65/bbl in 2023.
The use of crude oil as a substitute for natural gas presented a major upside risk to the demand outlook, although higher energy prices may start to weigh on global growth.
The bank forecast a 5% drop in metals prices in 2022 after a 48% increase in 2021. It said agricultural prices were expected to decline modestly next year after jumping 22% this year.
It warned that changing weather patterns due to climate change also posed a growing risk to energy markets, potentially affecting both demand and supply.
It said countries could benefit by accelerating installation of renewable energy sources and by cutting their dependency on fossil fuels.
(Reporting by Andrea Shalal; editing by Diane Craft)
Global Climate Policy Acceleration Means Sink-or-Swim Decade for Canada's Economy: Report – Canada NewsWire
OTTAWA, ON, Oct. 21, 2021 /CNW Telbec/ – Canada’s economy faces a “sink-or-swim” decade, according to the first study to assess Canada’s economic prospects in the face of accelerating global market shifts responding to climate change.
Sink or Swim: Transforming Canada’s economy for a global low-carbon future is a major new report from the Canadian Institute for Climate Choices, Canada’s independent climate policy research institute. The report assesses Canada’s economic prospects in response to the global low-carbon transition and offers recommendations for successfully navigating that transition.
Countries responsible for over 70 per cent of global GDP and over 70 per cent of global oil demand have committed to reaching net zero emissions by mid-century. Trillions of dollars in global investment will move away from high-carbon sectors. The impact of these global shifts will be profound, shifting trade patterns, reshaping demand, and upending businesses that are too slow to adapt.
To better understand the risks and opportunities of this transition for Canada, Sink or Swim stress tests publicly traded companies under different scenarios. Without major investment, the report finds, many exporters and multinationals will see significant profit loss in the coming decades. The stakes are high for Canada, with almost 70 per cent of goods exports and over 800,000 jobs in transition-vulnerable sectors, including oil and gas, mining, heavy industry, and auto manufacturing.
To succeed in this global transition, the report concludes, Canada must use climate policy, company disclosure, and targeted public investment to mobilize private finance and improve the resilience of Canada’s workforce and impacted communities.
“Our analysis shows that global policy and market changes will have a profound impact on Canada’s economy and workforce. To stay competitive, Canada needs to rapidly scale up new, transition-consistent sources of growth—and successfully transform existing ones. Moving too slowly is now a greater competitive risk than moving too quickly.”
—Rachel Samson, Clean Growth Research Director, Climate Choices
“The global transition means Canada must transform its economy in the face of new market realities. With smart, certain policy and innovation across the private sector, there is a path to strong economic growth, gains in well-being, and lower emissions.”
—Don Drummond, Stauffer-Dunning Fellow and Adjunct Professor at the School of Policy Studies at Queen’s University and fellow-in-residence at the C.D. Howe Institute
“Major Canadian investors understand the pressures our economy will be facing as a result of accelerating global market shifts, and we’re issuing a strong call for increased climate accountability and transparency in the corporate sector.”
—Dustyn Lanz, CEO, Responsible Investment Association
“The Aluminum Association of Canada supports a holistic view of Canada’s trajectory towards net zero emissions. A multifaceted approach with room for everyone will support a transition to a prosperous and sustainable economy.”
—Jean Simard, President and Chief Executive Officer of the Aluminium Association of Canada
“Canadian businesses and investors need clarity on which economic activities are consistent with the transition to a low-carbon future. Without that clarity, there is a risk that finance will flow in the wrong directions and miss areas of great opportunity. The analysis in this report will support the development of practical taxonomies that can be used for transition-consistent investment decisions and financial products.”
—Barbara Zvan, CEO & President, University Pension Plan and member of Canada’s former Expert Panel on Sustainable Finance. UPP is a participating organization of the Sustainable Finance Action Council
ABOUT CLIMATE CHOICES
The Canadian Institute for Climate Choices is Canada’s independent climate policy research institute, providing evidence-based policy analysis and advice to decision makers across the country.
SOURCE Canadian Institute for Climate Choices
For further information: Catharine Tunnacliffe, Director of Communications, (226) 212-9883
Fed survey finds economy facing supply chain, other drags – GuelphMercury.com
Get the flu shot: Public Health – Quinte News
Art Beat: It's Art Crawl weekend – Coast Reporter
ArtCity: Art education in the gallery (and virtual) space – Woodstock Sentinel Review
Silver investment demand jumped 12% in 2019
Europe kicks off vaccination programs | All media content | DW | 27.12.2020 – Deutsche Welle
Iran anticipates renewed protests amid social media shutdown
Science21 hours ago
Orionid meteor shower to reach peak on Thursday, but full moon may interfere – CTV News
Real eState10 hours ago
Calgary housing market sees best Q3 since 2014, says real estate board – CBC.ca
Investment20 hours ago
Simon Kronenfeld: Emerging investment opportunities – mtltimes.ca
Health16 hours ago
India celebrates 1 billion COVID-19 vaccine doses with song and dance
News17 hours ago
The Rojava Revolution Has Lessons for Western Feminism
Business18 hours ago
China Evergrande shares fall in resumed trade after $2.6 billion deal collapses
Tech19 hours ago
Samsungs Galaxy Z Flip 3 Bespoke Edition lets users customize their phone – MobileSyrup
Business18 hours ago
Tesla says new factories will need time to ramp up, posts record revenue