Suggestion To The President: Better Don’t Compare Your Financial Management: You Are Losing And The Worst Is Yet To Come

Member of the Academic Council of Libertad y Progreso. Degree in Economics from Universidad Católica Argentina. He is an economic consultant and author of the books "Economía para todos" (Themes, 2002) and "El SindromeArgentino" (Ediciones B, 2006). He serves as a columnist in the newspaper La Nación. Previously, he worked the same task for the newspapers La Prensa (1985-1992), El Cronista Comercial (1992-2001) and La Nueva Provincia de Bahía Blanca (1992-1998). He's the host of the cable TV show "The Economic Report." Lecturer in Applied Economics of the Master of Economics and Administration of ESEADE, senior lecturer in Macroeconomic Theory of the Master of Economics and Administration of CEYCE. President of the Center for Economic and Institutional Studies. He was Economic Adviser to the Argentine Chamber of Commerce (1983-2002) and to the Argentine Chamber of Importers (1992-1993).

INFOBAE – Statistics are unforgiving when comparing some variables and situations without scientific rigor

In his book The Rise and Decline of Nations, Mancur Olson states: “Today we economists have such statistical, mathematical and econometric tools that we can torture the numbers until they confess what we want.” This phrase remains with me, because it shows how one can manipulate the data to show a reality that is not such.

President Alberto Fernández has just affirmed that his management, even with coronavirus, is better than Macri’s. We will not defend Macri’s economic management because it has been questioned a lot and it is indefensible, but it is fair to recognize that Macri received an inheritance from the Kirchnerist government in which the current president participated as Chief of Cabinet. Heavy inheritance that, by the way, Cambiemos never wanted to tell, trying to sell the good vibes and the yellow balloons.

The first data to take into account is that the economic damage that Duhalde caused with the asymmetric pesification, the exchange rate and inflation jump, together with the Rodriguez Saá default in December 2001, plus the tailwind due to the increase in commodities, allowed Néstor Kirchner to be given a consolidated fiscal surplus of 1.59% of GDP, which grew to 3.54% and thereafter, the constant increase in public spending to finance populist policies deteriorated the fiscal result until the end with a consolidated deficit of 7.24% of GDP.

As can be seen in graph 1, from having a fiscal surplus of 3.54% of GDP, Kirchnerism ended up giving Macri a fiscal deficit of 7.24%. An inverse path of almost 11 points of GDP.

This deficit occurred despite the tailwind product of the price of commodities that allowed populist governments with autocratic tendencies to settle in South America during those years: Chávez, Correa, Evo Morales and from the left like Tabaré Vázquez and Mujica in Uruguay, Lula in Brazil and Bachelet in Chile.

Those exceptional commodity prices were a great waste in the K era as consolidated public spending was increased by 17 points of GDP, leaving the country with exorbitant public spending but with revenues that today do not allow financing that state spending.

Macri, who received a pathetic economic inheritance, left an equally complicated inheritance to Alberto Fernández and the president is taking care of further complicating the economic situation.

Fact number 1, the president said that by lowering the interest on the LELIQs, retirees would receive free medicines. The reality is that today the situation of the BCRA is much more complicated than the already complicated situation left by Macri. The stock of Net Passes and LELIQs that Macri left totaled $ 1.1 billion pesos and as of August 20 they had reached $ 2.6 billion. In other words, in addition to having increased the monetary base by 36%, the stock of LELIQs and Net Passes shot up to more than double what Macrí left behind, building a phenomenal quasi-fiscal expenditure that today all economists know is unpayable.

In terms of jobs, according to data from the AFIP, jobs in the private sector dependency ratio fell from 215,186 between March 2018 and November 2019. That is, an average of 10,759 jobs per month.

With Alberto Fernández, the jobs in a private sector dependency relationship fell by 312,009 compared to November (the last full month of Macri’s administration) with June, the latest data available from the AFIP. In other words, in the 7 months under consideration of Alberto Fernández’s administration, 44,572 jobs were lost per month, four times more than what was lost in the entire 20 months of the economic crisis of the Macri era. The president’s labor result in creating jobs does not seem to be very fortunate and, on top of that, he established double severance pay and a ban on firing.

On the side of the companies that closed their doors, with Alberto Fernández we have a decrease of 19,739 between November and June according to data from the AFIP, 2,820 companies closed per month with Alberto Fernández and with Macri, between March 2018 and November In 2019, 18,981 companies closed, an average of 949 companies per month. In absolute values, more companies closed with Alberto Fernández in 7 months than in 20 months with Macri.

If we take the Monthly Estimator of Economic Activity that anticipates the behavior of GDP, in the series with seasonality it appears that comparing June 2020 against June 2019 today it is 12.3% down. If we take the seasonally adjusted series and compare June against November 2019, it is 13.6% below November and 13% below February the month before the quarantine.

With regard to the manufacturing industry, in November of last year the utilization of installed capacity was at 60.7% and in June it was at 53.3% and let us remember that the president stated that he did not know from which quarantine he spoke if there was no quarantine and the industry worked at 90%.

Regarding the level of industrial production, the falls with Alberto Fernández are 6.6% year-on-year and 10.7% in relation to November.

Finally, taking the total jobs according to data from the Ministry of Labor, in the 20 months of crisis of the Macri era (March 2018-November 2019) 209,000 jobs were lost and in 6 months of the Alberto Fernández government ( November-May) 438,000 jobs were lost. Macri lost a rate of 10,450 jobs per month, and Alberto Fernández 73,000 per month.

If a suggestion could be made to the president, it would be good if he waited to compare himself with Macri, who made serious mistakes, but for now the mess he is making is much greater than that of his predecessor and we still have to see the worst after so much broadcast monetary, increase in the debt of the BCRA that is unpayable, increase in public spending and legal insecurity arising from the famous DNU to intervene Vicentin.

As the Desiderata poem says: if you compare yourself to others, you will become vain or bitter, because there will always be people bigger and smaller than you.

We still have to see the whole movie to compare results, but for now, it is more than vain to be bitter despite the gross economic mistakes of Let’s Change.