Interview to Aldo Abram about Argentina’s future

Rio Negro – Aldo Abram, Director of Fundación Libertad y Progreso, warned that if the country does not face the structural reforms that have been postponed for decades, “it will continue in recurrent crises and maintain high levels of poverty.”

The economist was very critical of the guidelines and measures taken by the National Government and stressed that the outlook will be more complicated for SMEs and regional economies. “The problem is not the debt. The debt has been restructured many times and the country falls back into crisis. The problem is that by not doing the necessary reforms, the country loses more and more credibility about growth and doubts about its ability to pay, ”he said.

Question– What is your evaluation about this first month of Alberto Fernández’s management?

Answer– Well, the only thing that could be seen so far are emergency measures to assist vulnerable sectors, but along the same lines as it has been in the past. That is, at the cost of squeezing with more taxes and invoking solidarity to the productive private sector and the middle class. The downside of all this is that no substantive measures have been seen. Argentina is coming from crisis to crisis for trying to sustain a state that we cannot afford.

Q– Will consumption be recovered?

A– Obviously not, because when I take (from) you to give to another, that does not increase demand. It changes its composition, but does not increase it. What could happen is that there is a marginal impact, where those sectors that do not have any capacity to save, with that income could consume something else, which can mark a marginal improvement, very limited and nothing more.

Q– The Executive explained that Argentine’s must save in their own currency and not in a foreign currency. How is that achieved?

A– I believe that when politicians or economists come out to talk about the fact that we Argentine’s should save in pesos, the first thing that should happen before that is they should respect our currency and stop depreciating it by financing excessive public spending or and, as it usually happens, devaluing our currency.

Q– The official argument is that by reassuring the Argentine economy you can generate a little more consumption and activity while negotiating the debt. How do you evaluate it?

A– That argument does not exist, I do not share it. The reality is that Argentina’s problem is not the debt. There is a problem of credibility and growth. If one could think that Argentina can grow and thus pay we would not have debt problems. I give a concrete example. Now we are going to restructure debt that was issued in 2005, 2010 and 2016 to redeem the bonds that were defaulted in 2001. In 2001 the bonds of the Brady Plan of the 90s were defaulted. And those bonds were for the default of the 80. Then, here it is not a solution proposal that the debt is restructured and the country’s problems have already been resolved, because if that were the case, the recurrent crises would not have occurred. Here the problem is that Argentine’s do not want to make structural reforms.

Q– What panorama do you see in the coming months?

A– What will happen is that there may be a very short recovery but after that we go to a crisis, the economy will fall a lot. The issue would be different if the Executive had said: “well we have this plan to reduce the State in a given time. And we will take steps in that direction.”

Q– But nobody proposes structural reforms?

A– If there are no structural reforms, Argentina will continue from crisis to crisis. Because we do not make the structural reforms and solve the underlying problems, there comes a time when the disastrous results of not doing this accumulate with such weight that they finally end up collapsing the economy.

Q– Do you think there may be some recovery this year?

A– Yes, by the middle of the year there could be some recovery, but at the most it can last one or two quarters, at most. Then it everything goes downhill.

Q– How do you evaluate the picture for regional economies?

A– Very complicated. The provincial productive sectors, which are mostly producers of goods and that in many cases those goods are exported, will be much more complicated than they were in the previous government.