Legislative Assembly: a barricade speech that puts more darkness on the economic future

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).

The President’s message in Congress aimed to further widen the rift, attacking the opposition and looking good with the Instituto Patria

Clearly, yesterday’s speech by the president aimed to further widen the rift, attacking the opposition and doing well with the Instituto Patria.

From an economic point of view, the speech focused on formulating a series of things to do, but without saying how he is going to do them or how he is going to finance them. In other words, a list of wishes rather than a list of proposals for measures to be taken. For example, when he spoke of the increase in poverty during 2020, he took care to highlight that poverty had increased more with Macri than with him. In any case he was trying to show the least bad result, not the best, because the reality is that he doesn’t have too many positive results to show.

Other times he gave data that attracted attention. For example when he mentioned all the public works that are underway. When one looks at capital expenditures for 2020 compared to 2019, an increase of only 18.3% is observed, almost 20 points below the inflation rate. In other words, investment in housing, energy, education, transportation, drinking water and sewerage fell in real terms during his tenure. It was variable of adjustment.

As a counterpart to this statement of investment in public works that is not visualized in the data, he affirmed that the government of Together for Change had not done anything in this area. Precisely, if there is something to criticize that period, it is that they began to do public works when the fiscal deficit had to be lowered. Instead they took on debt to finance public works and that further complicated the reduction of the deficit and led to the crisis of April 2018. Nobody starts to change the roof of their house, if it has leaks, taking on mortgage debt with the bank to finance the work if he is unemployed or the money is not enough to make ends meet. He waits to change the entire roof until he has enough income to undertake a work of these characteristics because if he cannot pay for the work, he will be left without the roof and without the house because the bank finishes off the house.

Put in other terms, Juntos por el Cambio could have lowered the fiscal deficit more quickly without initiating public works with state funds, in any case it could have called on the private sector to carry them out and charge tolls or fees to recover the investment, and in any case, In this way, avoid getting hung up on the brush because the external financing of the fiscal deficit was ending.

If there is something to criticize Juntos por el Cambio, it is not that it stopped doing public works, but that it precisely did them when it did not have the financial capacity to do it.

The issue of repudiating the foreign debt is already a classic of Peronism and liberals. Repudiating the foreign debt is an appeal to a false nationalism. Rodríguez Saá already did so in 2000 when, with the applause of the majority of the National Congress, he announced the default. The error of Together for Change was, precisely, to appeal to gradualism in the reduction of the fiscal deficit. To finance this gradualism, it resorted to foreign debt, in addition to borrowing to carry out public works, because the domestic market does not have credit available to finance the treasury. The issue was capped as was the tax burden.

What had to be done was to reduce public spending at a higher rate, but for that it was necessary to lower public spending, something that the government of President Fernández opposes, considering it a savage adjustment. When indebtedness and the decline in public spending are criticized at the same time, everything indicates that the person making this criticism does not understand economics at all. Or does the president seriously believe that there is and that there was scope to increase the tax burden to eliminate the fiscal deficit?

When the president says that he is going to initiate a criminal action for the debt taken by the previous government, it is worth asking: why is it a crime to take on foreign debt and it is not a crime to issue as this government did, destroying the currency? Recall that the current government made the BCRA issue $ 2 trillion to finance the treasury, making monetary issuance the main source of financing for the treasury, surpassing the VAT DGI, which raised $ 1.3 trillion in 2020. At the same time it issued to forced march, the BCRA increased its debt in LELIQs and Passes by 2.3 times. To get an idea of ​​the BCRA’s indebtedness, in November 2019 the BCRA had a stock of debt in LELIQs and PASES equivalent to US $ 17,164 million, and last December it was in the equivalent of US $ 32,418 million, that is, the BCRA it borrowed the equivalent of US $ 15.2 billion to finance the treasury in addition to the US $ 2 trillion issued by the BCRA.

Regarding the issue of utility rates, the proposal to decouple domestic prices from international prices has already been made in the past and led to gas shortages. As it will be remembered, the importation of ships with liquefied gas was one of the focuses of attention due to the cost they had.

In short, the tariff delay to achieve artificially low tariffs had a cost of US $ 161,000 million between 2006 and 2015, with energy being the item that required the most subsidies, representing the total of subsidies to have artificially cheap tariffs 5% of GDP .

On the inflation issue, he once again insisted on the issue of the Social Economic Agreement as if the inflationary problem were a matter of distributive bidding. It seems that only in Argentina and Venezuela there is a distributive bid that explains the inflation rate, because they are the only two countries in South America with this problem, not to mention the rest of the world.

In summary, the president’s speech before the National Congress leaves a great concern because he did not give any clue about what will be the economic policy to be followed and concrete measures in terms of tax, monetary, public sector, labor, and deregulation economy and integration to the world. On this last point, the little he said is that he wants to continue with the import substitution model. In other words, live with what is ours.

It could be argued that the speech was a political campaign barricade speech, attacking the opposition and formulating goal proposals without saying how they will be achieved. The president appears to have sought to widen the rift in Argentine society, to find culprits in the opposition and in the pandemic, and not to offer any consistent economic outlet for the future.

Possibly his only objective was to speak for his own troops and ignore the rest of the Argentines.