Argentina: A minefield for private contracts.

Enrique Blasco Garma
Consejero Académico en Libertad y Progreso

INFOBAE: Argentine society seems confused. It has forgotten that income is obtained exclusively by individuals through interactions between private parties. Overcoming the obstacles imposed by the State or helped by officials, each person, physical or legal, tries to solve problems, developing skills and coordinating activities, hiring personal businesses, encouraged by the prospect of Private Property.

According to foundational philosopher David Hume, the achievements of any society depend on the stability of rights and properties, covering the fulfillment of the commitments and the transfer by consent. That is, agreements being strong in order to avoid violations of agreed rights. Competition is a cooperative process, as long as there are stable and equal rules for all Competition is a cooperative process, as long as there are stable and equal rules for all.

Argentina’s main difficulty lies precisely the fragility of private property and the difficulty of contracting in a volatile context. Budgets are suddenly altered and people risk losing their livelihood. Country risk, a measure of mistrust in compliance with government bonds, confirms this.

Such mistrust regarding obligations exacerbates the difficulty of contracting, always subject to regulatory changes and changes of attitude from the State.

Confidence in the respect of private property, the main incentive for entrepreneurship, is strongly deteriorated by officials who ignore the uncertainty they cause with discretionary measures.

The great reason for the lack of competitiveness in Argentina is not the exchange rate but the unpredictability of regulations and government actions. All occupations are damaged by uncertainty (lack of knowledge and perspectives of the acts of officials). The great reason for our countries lack of competitiveness is not the exchange rate but the unpredictability of regulations and government actions

In the Age of Knowledge, regulations are altered and freedom contracts, to the extent where we are not even allowed to decide how to inform ourselves. The prohibiting the sale of tickets abroad on credit and the violent increase in the consequent cost of a plane trip warn of isolation and risks to come, courtesy of a government that says it does not want to cut spending when there is nothing else that can straighten out the country

The problem is that rulers proceed as if the world began with their management. They despise the past and citizens, reorganizing, changing rules as they please, and disorienting all activities. Forced redistributions impoverish and contract the patrimonies. On the other hand, the release of obstacles and favorable news expand the productive frontiers.

Favorable variations in the terms of trade, in the price relationship between exports and imports, together with the incidence of climate variations on production and consumption, also have an impact. In Argentina’s case, however, they take a back seat.

Inflation is caused by the issuance of money to finance the state misleads people. Paying with papers that lose value is a way in which the State finance itself by deceiving people.

Is it surprising that underfunded governments lose credibility? The singular gap between Argentina’s inflation rate and that of its neighbors, the first one being the only one in the high two digits, speaks of serious accumulated macroeconomic imbalances that the country did not deal with reversing.


Clearly, recognizing the dollar as a currency has advantages. An economy without guidelines, prices, and acquaintances wastes efforts instead of being productive. As evidenced by the growing mobilizations of the so-called social organizations seeking to extract payments from the State.

Inflation is a major obstacle to productive contracts, which require to be able to anticipate changes in rates and regulations. Depreciation is an accute risk, especially in an economy confused by being forced to use the legal currency that is not the one people actually use as a reference, the dollar.

The dispersion between the values of the different pesos / dollars ​​distress the expectations of individuals and companies. This affects agreements between private parties by generating a climate of growing uncertainty that is encouraged by the government itself by delaying an agreement due to the renegotiation of the maturities of debts and not reporting their plans, either because they do not want to communicate them or can’t predict them.

It is curious that the government blames Mauricio Macri for all its ills despite the fact that the country risk index fell during his administration until the 2019 primaries, when the markets got scared in anticipation of the government of Alberto Fernández and Cristina Fernández de Kirchner.

Similarly, the growth of debt is higher now than in the past, when much of it was not recognized because it was partially in default.

The current government focus on the debt with the IMF, which is barely 11% of gross obligations, because nobody else will lend money to them. They broke most ties and few believe them to be able to refinance it.

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