Argentina
Analysis

Argentina’s public finances feeling the heat from drought, infra investment

Bnamericas
Argentina’s public finances feeling the heat from drought, infra investment

Argentina’s fiscal deficit is being pushed upward due to increased spending on infrastructure and energy, as well as lower income from agriculture exports due partly to drought. 

The fiscal deficit reached 204bn pesos (US$1.04bn) last month, equivalent to 0.12% of GDP. This gives the federal government limited room to achieve its deficit target of 1.9% of GDP for the year, which was a target included in the debt restructuring negotiations with the IMF.

January saw total public income fall 3.2% year-on-year to 1.7tn pesos. This was the third consecutive month with a drop in public revenues, according to national statistics bureau Indec.

One of the biggest declines was seen in export taxes, which tumbled 29% year-on-year to 95bn pesos. According to Indec’s international trade report for January, this was mainly due to a decrease of more than 80% in wheat exports.

The Rosario stock exchange (BCR) has reported that there will also be lower figures for the 2022-23 corn harvest due to the drought affecting part of the country. 

The soy harvest, which begins in March, is also expected to take a hit. The BCR expects exports to dive from 5.6Mt in 2022 to only 2.0Mt this year. 

This would have a serious impact on Argentina’s trade balance, as agriculture accounted for around 60% of the hard currency that came from exports last year, the BCR stated earlier this month. 

The current drought has been compared to the one seen in 2018, which was estimated to have caused around US$3.4bn in economic damage to the country.

Authorities have announced measures to support farmers hit by the lack of rainfall, including tax breaks and financial aid worth some 5bn pesos. Banco Nación has also made a 50bn-peso credit line available.  

HIGHER SPENDING

Public spending increased 6.2% year-on-year in real terms in January, the first rise seen since last June, reaching 1.9tn pesos, mainly driven by a 17% increase in subsidies and a 27% hike in capital expenditures.

In the case of subsidies, spending for energy assistance increased 10% to 134bn pesos in the month, while transport subsidies climbed 8% to 48bn pesos. 

The increase in capital expenditures was principally due to a 501% year-on-year jump in public energy investments, which surged to 40.1bn pesos. Transport investment, meanwhile, slipped 32% to 19.9bn pesos and water investments were 12% lower at 14.6bn pesos.

As 2023 is an electoral year, the government is expected to raise public spending on infrastructure, but it faces the problem of the construction sector being hard-hit by inflation, which reached nearly 100% last month.

Subscribe to the leading business intelligence platform in Latin America with different tools for Providers, Contractors, Operators, Government, Legal, Financial and Insurance industries.

Subscribe to Latin America’s most trusted business intelligence platform.

Other projects in: Water & Waste (Argentina)

Get critical information about thousands of Water & Waste projects in Latin America: what stages they're in, capex, related companies, contacts and more.

Other companies in: Water & Waste (Argentina)

Get critical information about thousands of Water & Waste companies in Latin America: their projects, contacts, shareholders, related news and more.

  • Company: Hytsa Estudios y Proyectos S.A.  (Hytsa)
  • Argentine privately held consulting firm HYTSA Estudios y Proyectos provides sanitation, institutional strengthening and privatization, bridges and waterways, environmental, wat...
  • Company: Ecosur Bahía S.A.  (Ecosur Bahía)
  • The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
  • Company: Aguas y Procesos S.A.  (Aguas y Procesos)
  • The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
  • Company: Gral Saneamiento S.A.  (Gral Obras y Servicios)
  • The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
  • Company: Bridge Hydrogen S.A.  (BHY)
  • The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
  • Company: Automat Argentina S.A.  (Automat Argentina)
  • The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...
  • Company: Coingsa S.A.  (Coingsa)
  • The description contained in this profile was taken directly from an official source and has not been edited or modified by BNamericas researchers, but may have been automatical...