How much quarantine does the economy endure?

Photo Manuel Solanet
Manuel Solanet

La Voz – A clothing store advises its employees that it will not pay for the 11 days of quarantine on March. A hamburger restaurant fires its 21 eventual workers. A kinesiologist’s domestic employee does not know if she will be paid because her employer eats when she works and is out of work. A craft brewery chain, with three large stores, will lose five million pesos, including rents, spoiled merchandise and wages.

They called a textile SME on Friday from the bank to tell them that they have three checks to cover, but they are closed without invoicing. A real estate agency with several branches has the money for the month but in a safe deposit box. Two customers called a plastics manufacturer to implore him not to deposit the checks: it was what they had to pay the wages.

The workers of one of the large automakers in Córdoba have already been warned that the salary for the coming months will not be paid in full. A company asked the bank for the 24% credit line, they deposited it in the afternoon: at night AFIP (Argentina IRS) debited and ate it entirety.

Since Friday the 20th, the economy was paralyzed, from start to finish. Today the essential sectors are working, which represent around 30 percent of the activity. Nor is it that the movement is full there, with the exception of health. The sale of fuels, by case, fell almost 90 percent, the supermarkets have half the movement they expected and transport, for example, circulates with almost empty cars on the street.

Everyone assumes that this comprehensive 12-day quarantine will go further. But how much? How long can the economy endure before a massive bankruptcy of companies, of wage earners without salaries, of professionals with zero Pesos to eat, of closed shops that will not pay wages, taxes or rent? How much do the 10 thousand pesos and the reinforcements of the AUH pay in the neighborhoods where the only income is informal jobs? What are the gardener, the painter, the glass cleaner doing in an empty city and with people locked up? How long can guarded isolation endure until social peace is complicated?

Economy and health, incompatible?

When announcing the quarantine, President Alberto Fernández said it bluntly: “Between the economy and health, I choose health.” That was valid and had a broad social consensus. But 10 days from then and without certainty about how long this lasts, despair runs between those who have to pay and those who have to go out to work to eat.

That is why the debate was opened: there are those who say that nothing of the above matters if there is no health and that we must continue with the confinement, no matter how long it lasts. There are those who resist, like Bolsonaro, and say that we must not stop. But in the last week, several local and international voices warn that it is possible that the total stoppage of the economy, in the long run, may end up being worse than the disease. Economist Thomas Friedman brought it up last Sunday in The New York Times when he asked whether it is not more dangerous to leave millions of people out of work by closing everything for months without evaluating the risk profile of workers. There is consensus that a total closure for 14 days, which is the incubation period for the virus, is recommended. But more? How much more? Friedman himself says that after the 14 days of “horizontal ban”, that is, where the State prohibits everything but the essential, it is necessary to go to a “vertical ban”, enabling activities with surgical selection and always preserving the groups of risk.

“I am not opposed to quarantine, it is a fact from biology, not from economics or politics. But you can continue without dynamiting activity, because today everything broke, “says economist Gustavo Lazzari. And he says it with the experience of the street, because he manages the Cárdenas refrigerator. He claims that 75 percent of the checks had been rejected since Wednesday when the clearing reopened. “I cannot believe that they have made such an abysmal unforced error, the supermarkets had the problem and opened it to them, but they broke the only commercial relationship that matters, which is that of the supplier with their client,” he adds.

Although the banks “warn” that they will not apply fines or penalties for the rejection, it is known that they will later reduce the available lines of credit.

The 24 percent lines of credit that have emerged have serious limitations: the first is that they are for critical sectors, not all. The second is that they require a certain “portfolio”, that is, a previous rating from the bank. Today, only 15 percent of companies are qualified and are not according to the need for their working capital, which is what they need today. What’s more, they need it to cover the past capital, for what they issued, and the present, to at least pay salaries. “There are no critical or non-critical sectors, dirty or clean folders, the problem is that you cannot sell because the sale is prohibited,” says Lazzari. “A company that cannot pay the fortnight because the banks suck the money does not last two weeks,” he says.

Along the same lines, the economist Diego Giacomini maintains: “We are playing with fire, without an economy there is no health. The human being needs goods and services, we do not eat grass, and without production, we eat the stocks and there may be more violent situations”. Although without daring to specify, he believes that the situation cannot go beyond the end of April.

“If they continue treating the economy like this, this lasts until Tuesday,” says economist Jorge Ingaramo harshly. “You have to issue and without disgust, they have to send the twine to the companies; out of every 100 you issue, 25 percent comes back because they are taxes”, he adds. He calculates that to guarantee everyone an income during quarantine, the monetary base should expand nine percent. “If they are issuing three percent a month, I don’t see what the problem is,” he adds.

“It depends on the type of business and the back you have, but if it continues to be closed, it is only supported in April and generating an impressive debt,” says Gabriel Raed, a partner at the Castillo y Asociados study, who knows the business world well inside. In this context, it recommends focusing on the measures that are announced: Repros (which are automatic for those with up to 25 employees), negotiating with suppliers and using the exemption from charges and contributions. With a crisis prevention procedure, rental and salary contracts can be renegotiated. “Many companies are going to present themselves, without a doubt,” he says.

“We must do a more selective quarantine, analyze everything and see the activities that can go out into public life and those that cannot, and make them as flexible as possible,” recommends economist Manuel Solanet.

For the quarantine to be carried out, two things must be guaranteed: supplies and money to fill the refrigerator and pay for the services that the State did not exempt from the cut. “So the proposal we made with Fausto Spotorno: 30 thousand pesos each and we were left with noodles and rice,” says Lazzari. From Anses, direct issue, from banks or a mix of everything.

The problem is that this income for everyone today is not guaranteed. “The money from the salaries has to appear, guaranteeing this salary is very important”, Ingaramo insists. March is atypical because for a large part of the economy, unemployment was not complete. April is the great unknown.

Export Duties Asked to Defer 90 Days

Changes in the conditions of foreign sales.

Fecacera, the federation of chambers of foreign trade, asked the national government “to defer the payment of export duties for a period of 90 days and / or until the date of foreign exchange, which would allow many exporting companies to continue to go ahead with your projects without being disqualified by Customs ”. He argued for the interruption of the payment chain due to merchandise rejections due to falling demand, requests for renegotiation of prices and other unexpected situations, said the entity chaired by Miguel Zonnaras