EL ECONOMISTA – Our country is going through one of the deepest crises in recent times. Amidst the difficulties triggered by the pandemic and in the midst of debt restructuring, the economy is dying and crying out for an economic plan that sets it on a path that leads to sustained economic growth, or at least a plan that grants some degree of predictability.
In this way, the question that the Minister of Economy should ask himself is about how this long-awaited economic growth is achieved to leave behind the “coronacrisis” and to enable us to get out of the economic stagnation that we have been suffering in the last decade.
The first step is to resolve once and for all the renegotiation of the external debt. The small difference between the official proposal and that of the creditors indicates that there are no incentives for either party to kick the board and remain in default, despite the fact that the latest talks cooled the agreement. The closure of this issue is a necessary but not sufficient condition for a faster recovery since it allows private companies access to credit. Without credit, there are no investments of the scale Argentina needs.
However, there will also be no investments in a business environment where the rules of the game are changed all the time. Any investment involves risks that can alter the future projected by companies. For this reason, the entrepreneurs of these companies evaluate these risks, foreseeing the best possible macroeconomic fluctuations. What is impossible to anticipate are the decisions of the officials on duty who arbitrarily decide interventions, taxes and regulations.
The Vicentin expropriation case is a clear example of the change in the rules of the market game. Instead of letting the “regulation” solve through the bankruptcy of creditors the economic problem that the company was going through, the State intervened wanting to expropriate and arbitrarily manage a private company. This decision not only has economic and legal costs for the State since the highest cost of the decision to expropriate Vicentin is that which is not seen, the investment that does not arrive, the employment not created, the product not sold.
The business climate in Argentina is bogged down and frightens investments that are the engine of recovery and exit from this crisis. We see it explicitly today with the withdrawal of the Latam cabotage market that is withdrawn from our country not because of the pandemic, but because of the change in the rules of the game that leaves 1,700 employees on the street. The airline got tired of dealing with a state that maintains the monopoly of the inefficient Aerolineas Argentinas through a large mass of subsidies and prevents competition in the Argentine skies at the expense of consumers. Again, flying becomes a privilege of the few paid for by all.
What Argentina needs is to re-strengthen the institutions that, ultimately, are the foundations of any economic structure. Without them the economy is constantly reeling. Argentine history is a constant reminder of this. Starting from that base, the companies that come to invest in Argentina will know that their property will not be confiscated, that an official will not come to tell them how to run their business, a coherent and stable tax system. Thus, they will be able to value their projects in a more precise way, minimizing macroeconomic risks and enabling investments that otherwise would not be carried out. Some will succeed and endure, while those that fail will have to reformulate their business or simply bear the losses. The market is in constant motion and only those who know how to adapt to consumer demand are the ones that succeed.
Resolving the debt restructuring is crucial for the exit from the crisis, but it is not enough to be able to achieve the rapid recovery of the economy. Unlike those countries that have strong institutions and are not in the hands of the official on duty, they will be able to get out of the crisis in a better way than those, like us, who have weak institutions and with a constant change in the rules of the game. Trust in them takes time, the sooner we start to rebuild it the faster we can improve the living conditions of our country.