If there is one fact that all political and economic actors can agree on, it is that Argentina is in the midst of an economic crisis. All indicators, from activity to Central Bank reserves, spell out the scenario. The scope of the problem and its prospects going forward, however, are a matter of discussion. The view on how things are looking really depends on who you ask. 

Two recent reports illustrate these differences: while agriculture sectors believe there are signs that the worst is over, small and medium enterprises (SMEs) see no such thing and are convinced that the recession is actually part of the government’s plan.

Grains and livestock lean bullish

The Rosario and Santa Fe Stock Exchanges — which group grains and livestock markets, among others — published a report on Wednesday titled “Recession halted in the second quarter”. The document describes the Argentine economy as being in the midst of a 25-month recession but alerts that they are seeing “some positive values” emerge.  

“This does not mean that the recession has ended, but simply that it was interrupted,” Rosario Stock Exchange market analyst Tomás Rodríguez Zurro told the Herald. “It may be a short cycle like the ones that happened in other recessionary phases, or it may be the beginning of a growth phase.”

“However, we have another indicator, which tends to anticipate phase changes between two and four months, and it is also indicating that a recovery could be coming,” he said, adding that the agricultural sector has been the one leading the recovery, but that private employment and imports have been consistently falling.

The indicator Rodríguez Zurro quoted, called the Leading Composite Index of Economic Activity of Argentina (ILA-ARG), has shown three consecutive months of growth. However, the report showed that growth came after what has been the country’s most severe economic crisis since 1994, including the 1998-2002 debacle and the COVID-19 pandemic.

“The recession is part of the government’s plan”

The Association of Argentine Small and Medium-Sized Industrial Enterprises (IPA, by its Spanish acronym) published a report on Thursday highly critical of the government’s plan. According to the IPA, the Milei administration chose the manufacturing industry as the main victim of their economic measures. 

According to the report, industrial production is down 14.2% compared to 2023, even though the agribusiness and energy sectors have seen a rebound. They also said that factories are working at 57% of their capacity and warned that up to 12,000 SMEs could shut down this year.

“The government has chosen the Argentine industry to be the star of the depression. This is going to have short and long-term consequences,” Pablo Bercovich, director of the Mi PYME consultancy firm, said during the presentation of the report.

“Our estimates on the evolution of registered employment and the number of companies show a critical situation,” the report added. “As of May, we estimated that around 92,000 registered and private jobs had been lost, of which 40,000 were SMEs.” 

If the government does not course correct, around 180,300 jobs could be destroyed (226,000 in their most pessimistic scenario) and anywhere rom 8,600 to 12,000 SMEs could disappear. 

The report pointed out that, in addition to a sharp drop in demand, companies say that some of their customers are replacing their products with imported goods, as they are cheaper. Martín Kalos, director of EPyCA consultancy, said that Javier Milei’s administration is promoting “unfair competition” with foreign companies as it relaxed “exchange and tax regulations for the importation of finished products, but not for inputs used in production.”

Daniel Rosato, head of IPA, said that his association has tried to meet with the government to present a plan for industrial SMEs, but that the administration has not received them.

The report quoted owners of companies that reduced their staff. Bercovich said that they all spoke anonymously because they are afraid to criticize the government, as they consider that the administration has had “violent attitudes” towards their critics.

“The results we are having are part of the government’s plan, so it is very difficult to project any future changes,” an owner of an SME who requested anonymity told IPA.