Perfil – The director of Public Policies at the Fundación Libertad y Progreso and former Secretary of the Treasury of the Nation, Manuel Solanet, spoke this week before businessmen invited by the Córdoba Stock Exchange. In this space, in addition to analyzing the state of the macro economy and criticizing some aspects of the current national administration, he stressed the need to begin to chart an economic course that implies facing a package of structural reforms. Solanet detailed how a current vicious circle that begins with the fiscal deficit is operating and why it is necessary to break its operating logic to move towards another model.
“The factors of the vicious circle in which we must concentrate on demolishing start in the expansion of public spending. During the first Kirchner government, aggregate public spending went from 30 points of Product to 46 points, this determined an increase in the tax pressure that was not enough to sustain the fiscal deficit and it had to be financed with debt or with issuance. Macri financed it with debt, this current government with issuance. This leads to indebtedness or inflation and generates exchange control, exchange delay, increased country risk and all this comes together, together with the high labor cost, that the risk of investing in Argentina is high, there is little investment and little generation of private employment . When there is no generation of private employment, it is very difficult to reduce public spending, public employment continues to grow and the vicious circle continues to turn ”, he explained
According to Solanet, in order to transform it into a virtuous circle, it is necessary to advance in the generation of trust, which in turn forces to draw up a government plan that must face a series of fundamental reforms.
The reforms. The series of reforms that Solanet raises are those that a good part of the liberal arch has been proclaiming for a long time and include a complete package that ranges from the labor reform, that of the State apparatus, the pension system, the tax reform and the Coparticipation, the opening country, deregulation and monetary reform.
In his presentation Solanet addressed some chapters with greater emphasis. One was the one referring to the need for a labor reform, since, as he explained, Argentina maintains as a union organization system the single union copied in the 1940s of the Carta del Lavoro. “The first point of the reform is to privilege agreements by company, to modify the Law of Collective Agreements. We must deregulate and reduce the cost and risk of breaking the labor contract, we propose to go to the United States model that in some sense is applied in construction, an unemployment fund that is had to maintain the income of those who are fired, but deregulate layoffs, not go the other way, doubling the cost of severance pay or prohibiting layoffs because all that achieves is that companies are not encouraged to hire people. They say that taking an employee here is like adopting a child, the reference is not exaggerated ”. And he also elaborated on the need to reduce the size of the State. “There is a gigantism in the administration, we propose a reengineering in the State where ministries and structures can be eliminated. 100 years ago, the Irigoyen government structure was president, vice, secretary, officer, assistant, steward, and seven orderlies. Today there are 1,400 people for the same, it multiplied by 100. This is repeated wherever you go. The total budget was two pages. The mechanism that we propose is to make public personnel available and to generate incentives for private companies to hire this personnel, to be exempt from contributions and to have a subsidy for the recruitment of new ones.
And for public employees who cannot find employment in the private sector, early retirement. It is a system that requires some legal changes, but not many, and would allow a very important streamlining in the administration, “he said. However, he stressed that there is a fundamental precondition: strengthening the conditions so that the labor market can incorporate people expelled from the public sector: “If there is no creation of private employment, there is no possibility of applying a rationalization of this type because these people I wouldn’t get a job. We consider that in the three levels, Nation, provinces and municipalities there is a surplus of no less than 2 million public jobs in Argentina. We cannot think that this is so. If this is achieved, the confidence boost would be phenomenal, economic growth will be boosted to the level of being able to generate private jobs that can absorb these people, new entrants to the market and the informal ones ”, he assured.