A group of Buenos Aires economists from Unión por la Patria that coordinates Roberto Feletti analyzes the first five months of Javier Milei’s government and highlights the risks posed by the structural reforms promoted by the Law Bases in general and the RIGI in particular.
They indicated that Milei’s first five months in government confirm his intention to reinstall a model that nullifies the State’s capacity as a social redistributor and that installs the market as the sole allocator of resources. “Thus, business profitability will definitively displace public policies,” they point out.
“The economic program raises some important questions: first, If the fiscal anchor and the mini-devaluations of the official dollar are enough to contain pricesor if the rise in prices cannot be managed and ends up forcing a devaluation,” the paper maintains. And it warns that another unknown is whether two central features of Caputo’s program – the negative real interest rate and the exchange rate lag with respect to the prices – will allow us to consolidate a solid external balance that will allow variables to be stabilized and recovery to begin.
Evaluation of Milei’s first five months
Among the main variables, the report indicates that Economic activity (Monthly Estimator of Economic Activity) presented an interannual decrease of -3.2% in February 2024. Also in February and in relation to the same month of 2023, the three sectors that registered the greatest falls were: construction (-19.1%), financial intermediation (-12.1%) and manufacturing industry (-8.4%) .
They claim that “the provisional adjustment It was of such magnitude that the total contributions and contributions amounted to $5,093,359.6 million and the expense was 5,120,884.5 million (slightly higher by 0.5%). Of the 7,200,000 national retirees and pensioners, almost 5,000,000 receive the minimum salary, which in the month of March 2024 was $134,000 plus a bonus of $70,000.
“In matters of construction (according to the Synthetic Indicator of Construction Activity), activity showed a drop of 24.6% in February compared to the same month in 2023. The accumulated of the two months of 2024 of the original series index shows a drop of 23.1% compared to the same period in 2023. In February 2024, the seasonally adjusted series index showed a negative variation of 2.6% compared to the month previous”, the work points out.
They also maintain that the Supermarket sales in February 2024 showed a decrease of 11.4% year-on-year, according to data from the Supermarkets and Self-Service Survey (ESAM). In the case of wholesale sales, the decrease is 6.2%.
The situation of the workers
And they warn that, in January, More than 30,000 people working in the private sector lost their jobs. In addition, employment in the public sector also decreased by nearly 36,000 people as a result of layoffs carried out as part of government policy. In sum, nearly 70,000 people lost their jobs in one month of the libertarian government’s administration.
In relation to Minimum Vital and Mobile Wage (SMVM), Its last update was based on resolution 4/2024, which established an amount of $180,000 for the month of February and $202,800 for the month of March. On April 30, at the meeting of the Minimum, Living and Mobile Wage Council, the increase for subsequent months was agreed, skipping that of the current month (April) and January. “This implies that so far in LLA’s management, two increases in the minimum wage have been skipped, which further delayed the salary update with respect to prices,” they warn.
“After the 118% devaluation in December, the exchange rate began to recover and overcome the “lag” it had been suffering with respect to retail inflation. After three months, the exchange advantage was completely absorbed and passed to prices and at the end of March both indices were practically in absolute equality”, report the UxP economists.
And, on the other hand, they indicate that, At the end of March, the national public debt reached US$403,044 millionwhich represents the third consecutive increase in the debt stock measured in dollars.
Debt, a problem for Javier Milei
UxP economists warn that Argentina’s creditor investment funds, one of the main supports of the Milei administration, predict that starting in 2025 The country will not be able to meet the maturities of the restructured public debt.
Therefore, they consider that “Any future debt restructuring proposal will have as a counterpart pressure from creditor funds. for Argentine assets to be transferred to them” and consider that “this reinforces the danger of the foreignization of the national economy.”
Source: Ambito
