“A global crisis is approaching and Argentina must be ready for that”

La Nación-   Aldo Abram is a man of precise and forceful definitions. As an economist and director of the Libertad y Progreso Foundation, he believes that, in terms of reform of the State, the Government, rather than gradualism, applies “immobilism” and affirms that it is better not to have inflation goals than to have them and not fulfill them. From his point of view, the biggest Argentine problem is not the fiscal deficit, but excessive and useless public spending. But, above all, what he wants to make clear is a warning: “A global crisis is approaching and Argentina must be ready for that”.

– How do you see the economy today?

– It is well on track, although it is true that there is still a lot to do and what has been done is done at very slow steps. As far as the reform of the State is concerned, no progress has been made. More than gradualism, there is immobility. I believe that the reading that Argentinians would not endorse certain changes is wrong. Millions of Argentinians endorsed this government with their vote and want the necessary changes to be made.

 What reforms do you think should be done?

– The most urgent thing is to advance in a reform of the State. The main problem in Argentina is not the fiscal deficit, but excessive and useless public spending. In any case, the deficit is a consequence of the latter. If we solve the imbalance in public accounts and not the excessive and useless state, the best perspective that the country would have would be slow growth, well below potential. You have to imagine a productive sector pulling a car with a gigantic and useless monster on top. The downside is that less growth is lower poverty low. To decrease it fast we need to solve problems quickly.

 What do you think about the debt collection that exists today?

– The big problem we have today is what debt is used for. If it were used to reform the state and make it smaller, it would be fine. To finance the transition to the private sector of people who become unemployed in the State. But I see that part of the debt is used for mega-projects of infrastructure and historical reparation for retirees, which are two necessary and praiseworthy things, but politicians decide to do them without seeing if they have the resources or not.

 Why is it so difficult in Argentina to create genuine employment?

– I think that local and foreign investors, who are the ones who can create jobs, see that the course is good, but they are not sure that it is irreversible. On the other hand, in the country there is a labor legislation that is highly litigious and has many costs; then many companies instead of taking a new employee prefer to give overtime to those who already have. I think that little by little we will see the arrival of investments and the creation of productive employment.

 Why does not inflation lower everything that would be desirable?

– There is a lack of conviction or capacity in the Central Bank in terms of advancing inflation goals. I’m a fan of inflation goals, but it is preferable not to have them, than to have and not to fulfill them. The advantage it has over other schemes is that if one meets those goals, all the problems of joint negotiations are avoided and there is more certainty in the economy. The Central Bank is the one that regulates inflation: the more it issues, the more inflation there will be.

– That is, debt is taken, but at the same time it also issues

– Yes, they issue, because the Central Bank today does not have as a priority the fulfillment of the inflation goals, because what it has shown is that it tries to liquify the costs imposed by trying to maintain an excessively large State. They were printing a 37% last year and it continues to be done. The proof is that they can not lower inflation, because the reality is that this rose in the second half of 2017, compared to the same period of 2016. And as things go, by mid-year we will have more than 10% accumulated of inflation. Conclusion: the inflation target will not be met again.

– Do you think that, as some say, this is a government for the rich?

– Not at all. I think it’s a government that considers that it has much more restrictions to advance than what it’s shown in reality. In fact, the latest surveys show that the confidence that the country is improving comes from the lower income sectors and that those who start to get tired a bit are those with medium and high incomes. What one can say is that there was a change of model: the previous government looted the productive sector and with these funds subsidized an artificially rise consumption in the city, with a purely electoral purpose; This current government stopped looting the productive sector and that allows to continue producing. This was the best to avoid a crisis. The cost that it has is that we are going to have to pay a lot more for public services, which is fair, but it implies that we have to stop spending on other things.

 It says that we have to reform the State. Where would you start?

– Quality, you do not need to have 21 ministries, you would have to have eight at the most, and the undersecretaries should not exist. Another measure would be to be much more efficient with subsidies, because there are many overlapping and absurdities. The economic opening is another measure that must be taken urgently, because the country is still a very closed economy. You also have to be aware that there is a lot of public work that today cannot be done and will have to be left for later.

– Why do you think that all this is not done?

– Because the politicians are not aware of budgetary restriction, because they do not do it with their pocket, but with ours. They take the money with taxes or inflation. If I do not pay it, my children or grandchildren will pay for it, with all their interests. All this beyond that this huge state, even if it manages to be financed, will be a wagon that will walk slowly, at no more than 3% per year.

– How do you see the international economic context, now that the tailwind is over?

– I believe that the chances of a global economic crisis equal to that of 2007/08 are very high. That is why I believe it is urgent that the Government build a financial safety net, with international organizations and with private banks. I think a global crisis is approaching and Argentina must be prepared for that. We should have created a financing of not less than one year. That is vital.

Interviewed by: Carlos Manzoni / Published in La Nación.

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