A gratuitous shot at an already suffering economy is being made Argentina the extreme drought that the country is facing exacerbates the course of runaway inflation and leads to the devaluation of the national currency. At the same time, the unfavorable economic climate is undermining the future of the ruling party in view of the October elections. IMF revised down their forecasts for their second largest economy Latin Americaas analysts warn that the drought will trigger a deep recession. Millions of hectares of corn, wheat and soybeans – Argentina’s main exports, as well as a significant portion of jobs and tax revenues – will be destroyed this year, reducing the inflow of about $19 billion. According to Bloomberg, the drought worsens the economic situation in the country. Against the backdrop of increased money circulation, political unrest and the government’s inability to tame the deficit, annual inflation soared above 100%. At the same time, the peso has lost two-thirds of its value since the start of the pandemic, despite actions being taken to control it.

The impact of drought on crops could have broader economic impacts that go beyond Argentina. From global feeds to Chicago grain markets. In Argentina, a shortage of dollars is likely to restrict imports, require new exchange controls and further inflation due to rising food prices. According to Bloomberg, the cost of meat in February jumped more than 30% compared to the previous month.

The Fernandez government took desperate steps to stop the economic disaster through forced bond swaps and the creation of multiple exchange rates. Analysts warn that this strategy is piling up problems for the future, raising the risk of a massive currency devaluation that fuels even faster inflation and deepens poverty. The Buenos Aires Grain Exchange estimates that this year’s soybean harvest of 25 million metric tons will be the worst ever.

As consumer prices rose, central bank cash reserves stood at just $2.7 billion at the end of March, about $6 billion less than at the beginning of the year. While the central bank coffers are usually replenished by soybean exports at harvest time, a lower crop will limit inflows this year. This will jeopardize the government’s ability to repay its $44 billion debt to the IMF. On Tuesday, the Fund cut its 2023 growth forecast to 0.2% from 2% earlier, while economists in Buenos Aires expect the economy to contract by about 4%.