In the midst of the adjustment, the recession and the freezing of the dollarthe twin government surpluses they could lose validity. It could also be left aside, the DNU 70/2023perhaps the only current tool that the Executive has to transform the blender into a chainsawas he asked IMF to Javier Milei. This is the diagnosis that the minister is clear about Luis Caputo. With that prism we will have to analyze what happens in the coming days.
The fundamental fact is that while Milei began to bash the legislators and the entire political caste in his opening speech of ordinary sessions, the numbers of collection that was secretly disclosed showed that the taxes linked to the activity recorded in February a real 19% drop.
The collection of Tax Resources plummeted in real terms due to a poor performance of the income tax and VAT which are the two pillars of the system.
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Matba Rofex discounts a slippage of 7.5% in March and 14% in April in future contracts. Although it does not consider a significant jump, it foresees an attractive correction.
Depositphotos
It was obvious then that in the give-and-take that posed Milei In Congress, the “invitation” to the governors to advance a fiscal agreement in exchange for budget relief was due to the dark clouds hanging over the economy and the risk that the political forces in Congress stop your DNU 70/2023perhaps the only key to reconfigure the structure of public spending and impose the new rules with which the economy has begun to be managed.
This, added to a dilemma already announced in this column: in those same 75 days until May 25the Government will try to lower the inflation but, at the same time, you must establish a real exchange rate that is attractive for exporters to liquidate corn and soybeans.
This storm raises a question: is the adjustment in public accounts via liquefaction sustainable? What will happen when the drop in revenue forces new spending cuts? What difficulties could the elimination of the current DNU bring to the Government? With the May Pact, does the president Milei try to build a political shortcut to get through the most difficult period of adjustment?
IMF, dollar and adjustment
The proposal is revealed to be more important since the Government itself has been agitating that “the fight against fiscal deficit It is the mother of all battles.” That is where the Casa Rosada and the Palacio de Hacienda want to be followed. Not for nothing, the trial balloon that is the May Pact proposed by the president seems to condense much of its quintessence in those issues.
On the one hand, fiscal balance and reduce public spending to no less than 25% of GDP; on the other, a tax reform to lower the tax pressure and another labor reform to make the rest of the adjustment. He also proposes discussing co-participation (most conflictive point); a pension reform (private retirement) and the opening to international trade, among other proposals.
Doubts also filter in from that side. If the economy is headed for a brutal recession and the government’s reforms for now only aim to use the blender more than the chainsaw, what kind of surplus will it be able to offer in the future? How to administer a State that will be defunded but whose structure will persist?
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Georgieva and Yellen’s request
He IMF he realized quickly. He called for greater institutional support for the reforms underway. He demanded it from the Government. Also Janet Yellen, the Secretary of the Treasury. She suggested, at the same time, a change in structure to obtain the surplus: more social consistency and less discretion.
It is the origin of May Pact. The Government seeks to get the provinces to “help” it cut spending, while bringing them to a dialogue table with the carrot of Co-participation and the threat of the brake on direct transfers. A dialogue table with the provinces that protects the DNU.
The governors have already warned that there will be no collaboration to push the omnibus law. In any case, the Government buys time to maintain the DNU current. It must be remembered that Milei’s DNU repeals numerous laws to guarantee food supply, abolishes state regulations, enables the privatization of public companies, makes dollar operations more flexible and, although for now on hold, it makes the labor market more flexible.
Laws that favored industrial promotion in disadvantaged areas are also repealed, prevented the privatization of public companies or regulated foreign trade, among others.
Source: Ambito