Argentina’s budget discussion for next year is coming. Another problem for the Government?

EMPRESARIOS WEB – The economic crisis gives no respite and the economist Aldo Abram deciphers the next moves of the Government and how it will impact the different sectors, from here until the end of the year.

Aldo Abram, has very deep family roots with Salta and when he can he visit us. As a result of his profession, he maintains a very broad vision of the economy, through his work as an academic and researcher. He is currently the Executive Director of the Libertad y Progreso Foundation, with a critical analysis of the current scenario, noting that recently they presented a paper on how to lower public spending. In a dialogue with Entrepreneur Dossier, he didn’t avoid any topic.

  • Is the budget for next year another problem for the Government?

It is going to be a subject of strong discussion, mainly because it is necessary to adjust the expense, obviously, it is already being evaluated, especially with regard to the transfers to the provinces that are not automatic, which already generated a claim from the governors. However, you have to remind people that these reductions do not mean an additional adjustment. we should recall, back in 2015, the Supreme Court declared illegal the retention of 15% of the co-participation that Cristina de Kirchner made and that was later transferred to the ANSES. From that moment, with the negotiation, the provinces are receiving 3 percentage points more of co-participation. In this year they will receive more than 20 million pesos more than they received last year. They are going to have resources, the problem is that the spending anxiety of the governors, is excessive.

  • Is the Fiscal Pact already history?

On the contrary, it will be the tool that the Government will use so that the provinces comply with the commitment assumed when they signed it. Luckily, there are no goals, within the agreement signed with the IMF that have to do with the provinces. That is good, there is the restriction of having to download the resources that are sent through non-automatic transfers, but on the other hand, it is also true that the national government is losing revenue from the co-participation that is transferred or is returned to them. The provinces should not have difficulties to comply with the fiscal pact and if they do not, it is because they clearly do not have any vocation of austerity, at a time that is necessary to do so throughout the public sector.

  • You presented a project to lower public spending. What is the way that could be done?

What we propose is that there can not be a State with 21 ministries, in addition to the two sub-chiefs that were created and 3,000 divisions that make up the national public sector, in this context there are a lot of employees who are not useful to society. It would be necessary to make a cut of that expense that does not serve for anything, including also committing the provinces and municipalities, in that line. It would be important to achieve a state that serves the citizen, what we propose is that the resources that the IMF will provide us will be used, through different programs, to reduce the gigantic State that we have today.

  • So far the change of the president of the Central Bank has paid off. What is your reading?

Luis Caputo has a credibility that Sturzenegger had lost, in addition to being at the head of a bank with much weakness in the task of defending the value of the currency, now he will have to show if he is successful in the task. If it does not, we will have the problem of inflation and exchange rate runs will continue in Argentina. Not necessarily a country arrives at dollarization because it raises it, but because it permanently destroyed the credibility of its own currency. Since the seventies we removed thirteen zeros, which is something we have to take into account, unfortunately, we can not continue like this.

  • Is the dollar controlled?

The truth is that the dollar is not a problem. What happens is that people run away from our currency because the Central Bank is not reliable. People cannot be required to stay in a currency, knowing in advance that they are going to extract purchasing power to allocate it to something else, as the BCRA had done in the previous administration or to speak during the previous government, much worse still in terms of destroying the confidence of our own currency. To the people, their savings have cost a huge effort, then it is logical that they seek to preserve that effort and that sacrifice. If there is no change in monetary policy, we will continue to discuss inflation and the exchange rate.

  • Is inflation still the main problem?

As long as we do not start to manage the BCRA, with the firm priority placed on preserving and defending the value of the currency, that continues to be our problem because clearly, with monetary instability you can’t have economic stability, and today what we have is instability. A currency exchange like we had is a clear sign of the weakness of the BCRA, the weakest point we had at that time, from now on we must strengthen it and defend the value of the peso of all Argentines, in other words, stop cheating.

  • Does tax pressure choke the productive sectors?

Not only the productive sector but also people, as in the case of an employee who is in a dependent relationship and does not have the salary to pay income tax, then he has to work half of the month to pay the State. Many talk about lowering taxes, but raising companies, then we are losing sight of the fact that our country is in the 21st position of the most taxed companies, that position is worrisome.

The public sector did not make any adjustments, the private sector did and in this situation, many people are going to have less interest in having their money or investing in Argentina. There is no margin to continue pressing, squeezing the productive private sector that is the only one that generates wealth, to pay salaries from the private sector. To maintain an unpayable status does not go any further because that excess of spending has to be done to through indebtedness, which today is closed. The extravagance of the state has to be reduced,  it is time for the adjustment to be made by the public sector, instead of shrinking the productive sector, at the national, provincial and municipal levels, otherwise the wrong course we took decades ago will not end.

  • What can happen from here until the end of the year?

From here until the end of the year we have to see if our political leadership takes things seriously. So far, the truth, neither from the government nor from the opposition is a commitment to give strong signals, because it is as if a family that lived on the borrowed, one day receives a letter from the bank that says, look if you don’t pay me what you owe, I will keep your house. We have the option of continuing to squander or take advantage of what has been achieved with the IMF, in that case making the effort to order finances and end the crisis.

Replicated in OpiNorte