Food is not expensive, Argentines are getting poorer

EXPORT CHALLENGE – As shown by the Workers’ Poverty Index, produced by the “Libertad y Progreso” Foundation, Argentine workers are in a stage of impoverishment; since their wages are closing their distance with the Total Basic Basket (CBT), which determines if someone is poor. Well, the lower this index and the more workers will fall into poverty. In other words, more of them will have problems buying the products they need, because their salary is not enough.

However, the government blames producers for making things “expensive”, especially food. For this reason, a “scapegoat” was the field, since the international prices of its products are rising. But it was soon shown that their participation in the final good placed on the gondola was very small, even less than that of the municipal taxes and the national and provincial taxes levied on them. Given that the latter, even in the best of cases, are more than 20%, it is clear that politicians should not look so much at the straw in the other’s eye, but at the beam in their own.

Then they talked about the “Curse of Exporting Food.” If anyone is asked who the lettuce is cheaper for, the one who produces it or the one who buys it? No one would hesitate to answer that to the one who produces it. Since in the country that exports a food, its producer chooses between selling it to local consumers or abroad; The internal price must be similar to the one he would charge by placing it at the border or port at the disposal of buyers from other countries. These, in turn, must take them to their own consumers; which will add the marketing, logistics and freight expenses. Therefore, those who buy them in the gondolas of importers will have to pay all those costs that are not paid by those who buy them in the exporting country. In conclusion, it is a blessing to be able to produce food; because that lowers the price of them. We can make a comparison by taking two neighboring countries Chile (which imports much of its food) and Uruguay (exporter), which shows that food is usually cheaper here. For example, a liter of milk in Argentina costs USD 0.88; USD 1.12 and USD 0.78 for Chile and Uruguay respectively. The kilo of meat USD 5.71 (ARG); USD 9.4 (CL) and USD 8.04 (UY). A dozen eggs of USD 1.69 (ARG); USD 2.86 (CL) and USD 2.32 (UY). Here we must make a caveat, in Argentina, the tax burden on the price of these products is higher than in these countries, which should be in its favor.

The question is: why are there countries that import their food, can their people pay for it more expensively and have sufficient access to it; while in some that produce them, there is part of their population that does not have enough to eat, as in Argentina? Let’s go back to the example of one person. Only a minority is dedicated to producing food; but that does not mean that the rest cannot buy them. That will depend on whether, by doing something else, they can generate the income to acquire them. The same thing happens with the countries, those that prosper have a good diet, whether they produce food or not; since the important thing is to produce the resources so that its inhabitants can buy them because they have a good income. Returning to our previous example, an Argentine worker receives (at the official exchange rate) USD 506; a Chilean worker, US D645; and a Uruguayan, USD 514.

In Argentina, some economists and politicians have made us believe that we are rich because we have many natural resources. Nothing more wrong. An apple on a tree can satisfy hunger; but only if someone takes the trouble to harvest it. If not, it will never feed anyone. Therefore, it is clear that it is necessary to promote the investment of Argentines and foreigners in the country in order to prosper and provide its people with greater possibilities for progress, allowing them to leave poverty or move further away from it. For this, we must advance in the structural reforms that have been pending for decades, which are the reason for our economic decline through crisis, and that the different governments refuse to face, either out of ideological conviction, such as the current one, or because of its political cost, like the previous administration.

Beyond the economic recovery that we will have during 2021, simply by letting people and companies who were prohibited from working during a long and restrictive quarantine, added a very favorable international scenario, the key to avoiding a new crisis in the coming years it is to solve the fundamental problems of the country. Here is a summary of what to do.

a) Elimination and gradual reduction of taxes: Comprehensive review of the tax structure in order to eliminate taxes with very little collection, reduce their weight and simplify their administration by taxpayers. It is impossible to think that someone will invest in a country that is in position 21, out of 190, in a ranking of those that most squeeze their companies with taxes or, according to the World Bank, a SME that will pay all its taxes is highly probable that lose money. Of course, it would be demagogic to suggest that this can be done overnight and not clarify that it will require more efficient public spending to bring it to levels that are payable with a reasonable tax. However, it is possible to pass a bill that says how taxes will be lowered over time, as the State is reformed.

b) Reform of the national administration: Its objective is to substantially reduce the number of employees of the National Administration and unnecessary expenses, ensuring that no person loses income immediately and has the opportunity to reintegrate and progress. It includes: i) Changes in public sector labor standards to incorporate results-based management. Continue with digitization and improvements in computer technology. ii) a Decree with a new structure (there is a proposed organization chart) within the framework of the powers established in Law 25,164, on Public Employment. The administrative units dependent on each of the eight ministries will be defined, up to the level of national directorates, general directorates and decentralized organizations. The decree will establish the staffing of each administrative unit, by category. iii) Appointment of the ministers of the new structure. On a temporary basis, for 90 days, the administrative units of the old structure are assigned to each of the new ministries. In that period, each new minister covers the positions of the new structure, giving priority to available personnel. Once the re-classification of personnel is completed, those who have not been relocated in the new structure will remain in the condition of availability established by Law No. 25,164 Art 11 (They do not fulfill tasks; but they receive a salary for one or two years. the social cost of being left without income is avoided.). iv) Incentives to companies that hire them: eg exemption from employer contributions for a period of two years and subsidy on training expenses in the new job. Early retirement for those who, remaining available, have not found a job in two years and are over 60 years of age.

c) Deregulate the economy: Put together a new system with the norms that are really necessary and repealing all the others, of the more than 67,000 existing ones, that are not included. It is incredible, but with most of them, the different officials who passed through the State tried to order the workers and employers how to do things better than they did. Since that is impossible, regulations have forced everyone to be more inefficient; which makes them generate less production and well-being for the whole of Argentines.

d) Labor reform. Privilege labor agreements at the company level over collective agreements at the activity sector level. This will require that the representation of the company’s workers be unified. This reform requires a change in articles 17, 18 and 19 of Law 14,250 of Collective Agreements (by DNU or by Law). Ensure freedom of association. Deregulate and simplify the administrative controls of the enforcement authority and the labor police. Modify, through regulatory decree, Article 84 of the Labor Contract Law to increase productivity and reduce cost overruns and occupational risk. Reduce the cost and risk of dismissal, respecting acquired rights, through the forward suppression of severance pay (reform of articles 231 to 255 of the Labor Contract Law, by DNU or Law) compensated by a fund and insurance unemployment.

(For more details https://www.libertadyprogreso.org/2020/08/25/reformas-estructurales-para-salir-de-la-crisis/).

The government must be convinced not to persevere in the wrong diagnosis and learn from the past. This way you will not repeat the same mistakes. As happened with CAMBIEMOS, which relied on an initial economic recovery and thought that it could be postponed in time to cure the serious ills of Argentina, ending with a crisis in 2018. If we succeed and a detailed structural reform plan is launched, Argentina has great potential for growth and for providing greater opportunities for progress to its inhabitants.

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