Little suffering for Argentine economy

Wall Street banks warn that the energetic crisis may be detrimental to economy growth, though it would barely be noticed this year, rather in 2008. According to estimates made by some of the main entities, this situation may reduce expected expansion by one point.

This matter is of great concern to investors holding the so-called GDP coupons, which develop according to economy pace.

Recommendations for GDP coupon keep on being positive. Most institutions highlight that, at least for some years, Argentina will continue growing above 3 per cent annual, which is the "basic scene" this coupon includes to pay its holders on an annual basis.

For example, Deutsche Bank published on Monday a report on "GDP coupon and energy crisis". The entity signals that shortage of power supply "may reduce economy growth by one point," but only evident next year, when GDP is expected to grow just 5 per cent against 7.6 per cent for 2007. "Such estimate arises from similar events observed during the last decade in Chile and Brazil." Value of dollar-denominated coupon, according to DB Economist in Chief for Latin America, Gustavo Cañonero, settles at 16.9 per cent.

The German bank has a more worrying outlook for the future. "Taking into account that investment climate is not completely friendly, we see that Argentina in the medium term will return to an average 3-per cent growth, in keeping with an investment hovering around 22 per cent of GDP."

Overheating

For its part, JP Morgan has also disclosed a report on Argentina, stating that "economy is overheating, rather than slowing down." In this sense, the entity signals that lower industry growth during the last months responds to "specific factors" which have hit supply, like dry weather reducing power supply due to hydroelectric problems and record low temperatures. Therefore, JP Morgan has kept its 8-per cent growth forecast for 2007.