The Minister of Economy, Luis Caputo, remains highly optimistic about the progress of the fiscal adjustment, that has been giving positive results to the Government, although at the same time complains about mistrust that the brokers still show and market analysts on its sustainability.
The head of the Treasury Palace anticipated that In May the National Public Sector (SPN) will once again have a financial surplus, which would be the fifth consecutive month in which the objective of keeping the accounts in the green is met.
“Even with four months of financial surplus, which will be five because in May there will also be a surplus, many still doubt and insist on us. Imagine if the results weren’t coming“, he said before the audience of the Argentine Institute of Finance Executives (IAEF).
For the official, the problem is “track record” of Argentina, its pastwhich is in his opinion what makes not believable nothing a government does, regardless of its orientation. In that line of thought, The operators are going to be waiting for the crisis.
If it is because of what the minister describes as “perfidence”, the analysts propose that The positive result that the national public sector is having is due to the effect of the PAIS Taxwhich made most imports more expensive by 17.5%.
Even the successful placements of bonds for importers, the BOPREAL, included the tax, which is making big differences. Economist Javier Casabal, from Adcap, states that “so far this year, The PAIS Tax collected 0.4% of GDP and explains half of the primary surplus.” “That is to say, there would have been a financial deficit of approximately -0.2% of GDP,” if this tax had not been present, he explained.
A tax that makes a difference
The tax, which was born only to discourage people from buying dollars for hoarding, has become one of the taxes that make a difference. In real terms, the PAIS tax grew 209.9% year-on-year in April with a total of $489,038 million. It is worth remembering that Last month’s primary surplus was $264,952 million. If it did not have that extra income that was not there last year, the Government would have had a deficit.
If the objective of the current administration is to lift the stocks and move towards normalization of the exchange market, it is clear that the tax is destined to disappear. President Javier Milei himself rejected the pressure from the Patagonian governors to make him co-participatory, which would have meant that he would stay forever. It’s about a distortionary tax which makes imports more expensive, both of final goods and inputs for production.
When speaking about the preview of the May result that Caputo made at the IAEF, the economist Gabriel Caamaño, owner of the consulting firm Ledesma, He also stated that the PAIS Tax comes “with an extra $260,000 million ‘help’ from BOPREAL series 3, dividends.”
“There’s not much surprise or novelty there. The issue will be the magnitude,” she said through his social networks. The analyst indicated that the Minister of Economy “You have to ensure that the fiscal anchor is not a dependent COUNTRY tax.”
What economists warn is that if the fiscal result depends on the tax on the purchase of foreign currency for imports, then Exiting the exchange rate becomes unviable. In fact, Caputo could not say when the restrictions could be lifted.
The fall in activity, the other problem
The other problem is the fall in activity, which reduces fiscal resourceswhich may force the Government to deepen spending cuts.
As pointed out Martin Calveira, economist at the IAE, the business school of the Austral University, “there is a pressing need for economic activity “is reactivated in order to sustain the fiscal surplus and avoid a further deepening of the spending adjustment.”
“A greater depth of adjustment could become an inconsistency for the objective of resuming economic growth after twelve years of net GDP contraction,” warns Calveira.
Source: Ambito
