Argentina needs to make structural reforms to grow again

Xinhuanet – Argentina needs to carry out a series of structural reforms, including labor and tax matters, to return to the path of economic growth, the Argentine economist said on Wednesday.

Natalia Motyl, an analyst with Fundación Libertad y Progreso, said in an interview with Xinhua that the various reform attempts in the country “have failed because two types of balance coexist, the political and the economic. Among them, there is a constant ‘trade-off’ and both bid to impose themselves.

«On the one hand, there are the political interests, trying to get votes for four years, for the next election and on the other, the economic interest that would allow us to get out of the successive economic crises. Evidently, many of these reforms have a political cost and that is why the political ruling class tries to postpone the reforms later and thus hold in power as much as they can ”said the analyst.

The International Monetary Fund (IMF) released its report on World Economic Outlook on Wednesday and a document entitled “Restarting the growth of the emerging and low-income market”, in which it analyzes the situation of different countries that have made reforms and places the Argentine economy among the most failed, along with Mexico, Nigeria and the Philippines, when implementing structural reforms that allow it to approach the standard of living of developed countries.

Motyl said she agreed “completely with the diagnosis of the IMF. In order to grow, Argentina clearly needs to carry out a series of structural reforms, including labor reform, to provide greater flexibility to the labor market, and tax reform, through lower tax pressure, which currently exceeds 30% of GDP and It is regressive ».

«However, in order to carry out this type of reform, it is necessary, in the long term, a sustainable fiscal adjustment in the long term via reduction of public expenditure and not, as the agency had been endorsing so far, through a rise in taxes that drown the private sector even more, ”said the expert.

The economist remarked that «the IMF until now has not been a strong figure when it comes to the herculean task of demanding our country the reforms necessary to grow. Rather, it endorsed a gradualist policy, which further sharpened the economic crisis. At the moment we have the same problems as four years ago, but now we are indebted ».

Argentina last year signed an agreement with the multilateral agency to access a loan for 56.3 billion dollars, of which it received about 44.1 billion. A disbursement of $ 5.4 billion is pending due to political and financial uncertainty in the country following the reversal of the Mauricio Macri government in the primary elections held on August 11.

In its report on Wednesday 9, the IMF said that Argentina carried out a series of reforms between 1988 and 1997, but the result was not as expected, of approaching the standard of living of developed countries, but the opposite, a distance of 1,5% per annum in the period 1998-2007.

The structural reforms advocated by the IMF include releasing key areas of the economy, such as finance, commerce, product markets or labor deregulation.

For Motyl, Argentina will recover the path of economic growth if “a labor reform, a tax reform that includes the reform of federal tax co-participation, commercial opening, an educational reform and achieving a healthy currency prosper. Each of them are necessary and essential to be able to get out of this stagnation in which we are for a decade.

«Need, in order to carry them out, a strong political figure will be needed to encourage them. I do not think there is much more room for maneuver to try something different given the delicate situation we are in, ”he warned.

According to data from the National Institute of Statistics and Census (INDEC) released in mid-September, the level of unemployment in Argentina increased in the second quarter of the year to 10.6%, affecting about 2.1 million people.

In addition, to the contraction of Argentina’s economy, estimated by INDEC at 2.5 percent at the end of the first half of the year, there is an accumulated inflation of 30 percent in the first eight months of the year, which makes it difficult for thousands of households in the country to make ends meet.

The economist emphasized that “there are no magic formulas and postponing reforms, which are inevitable, makes the situation worse. However, sometimes it is better to take risks and face the situation as early as possible. Otherwise, what happened to President Macri could happen.

That is, he continued, “the initial problems later became a reduction in governance and economic tension affected the political equilibrium If they had made the reforms four years ago, when they assumed the current government, today the story could be different, both for the ruling party and for the rest of the Argentines.


By Natalia Motyl