In this context, the parity was resumed. YPF tankers reached an 80% agreementbut with the possibility of reaching new agreements depending on the evolution of the consumer price index in October and January.
In the Council of the Americas, advances of new measures were advanced:
- Negotiations on three REPO mechanisms for the strengthening of reserves, with an Asian bank, a European bank and a US bank
- A regime that promotes private investment in construction through the free availability of dollars and tax benefits for the sector
- The launch of two lines of credit, one aimed at increasing installed capacity and capital goods, and the other linked to the first SME export
The doubts that arose about the consistency of the initial declarations and announcements begin to transform into certainties with numbers that do not close. Which?
The goal of meeting the primary fiscal deficit target of 2.5% of GDP It does not have concrete instruments. The current fiscal dynamics makes us project a primary deficit for the end of the year of at least 3.3% of GDP (a deviation from the goal of almost 1 GDP point).
The only relevant announcement in fiscal matters was the savings in economic subsidies for a tariff correction that appeared to be more ambitious. However, the lack of clarity in the exhibitions, through a press conference, dashed that expectation.
The tariff increase policy will separate the target population into three groups. Only the first group would face an elimination of subsidies, while for the other two in practice they will imply that the disbursements of the State continue to grow. The officially estimated saving is $49.5 billion for the three services, while next year it would reach $495 billion.
In addition, these increases are the only ones planned and then prices would be fixed again. With which, a new cycle of real backwardness is guaranteed during the coming year (with an economy that is traveling with an inflation of the order of 100% per year). If an indexation-type support scheme for real prices is not established, even the rates of the first group will demand disbursements from the State in a few months.
How relevant is $49.5 billion in 2022?
It implies a saving of only 0.06% of GDP. In contrast to the $112,000 million that the bond will cost retirees throughout the months of September, October and November, 0.06% GDP will be saved in subsidies and 0.14% GDP more will be spent on transfers to retirees. The deficit would not only not be corrected, but would be larger.
The extraordinary advance of the Income Tax would contribute (according to IARAF estimates) some $100,000 million (in addition to what will go via co-participation to the provinces). The net of these three elements would result in a reduction of the fiscal deficit of 0.05% of GDP.
How necessary is the bonus for retirees?
In August, for the second time, the minimum pension was not enough to exceed the equivalent adult poverty line (the first time was in May 2021).
In summary, Although the disorderly politics aggravated the destabilizing dynamics, the underlying problems are economic and will not have a solution until a decision is made to undertake a series of reforms that manage to put fiscal, monetary and exchange imbalances in order in a sustainable manner over time. If this is not seen, a new exchange rate and inflation jump would leave the new economic management weakened until December 2023.
Professor at the University of CEMA.
Source: Ambito
