The path that sooner or later the Government must take

The Argentine economy coexisted for a long time with populist economic proposals. This systematically led us to a State where companies had to live with fiscal deficit, monetary issuance and inflationa cocktail that assured us a devaluation of the monetary sign.

As if this were not enough, the authorities exerted significant influence on the Central Bank, which proposed negative interest rates against the inflationwe had Prices Care and closed the economy. This was complemented by subsidized rates. Clearly, this did not attract investments, it increased unemployment, black labor and poverty. Oh I forgot, salaries were very low given the low investment.

In the current scenario, the government intends to bring order to the pre-existing economic regime. It is the antithesis of populism, it proposes fiscal surplus, not issuing and lowering inflation levels, the expectation of being able to achieve these results caused the dollar, far from rising, to fall, and Argentines demanded the peso, which gave more value to our currency. In the first three months of the year, inflation was 71% and the MEP dollar rose 6.4%. The one who bet on the dollar lost.

He central bank It is on the way to recovery, but to achieve this the government placed dollar bonds on the market, increasing the entity’s liabilities. The debt paid in pesos continues to grow, but we should not rule out that the greater order made the reserves less negative, and the net worth of the governing body is on the way to showing positive net worth.

There is still a lot of water to flow under the bridge so that the central bank can lift all the stocks, and that in Argentina exporters charge in dollars, and importers can bring merchandise without asking for dollars from the central bank and are captured by high taxes such as withholdings, country tax and others. The monetary policy interest rate It is set by the Central Bank, and is negative against inflation. This does not seem elegant in a libertarian government, but the restrictions are understood.

The public rates They are no longer highly subsidized, they are in a process of recomposing prices, making local prices equal to international ones.

In this context, where the prices in pesos they are high, the wages They are low and dollar prices look high due to the drop in the exchange rate, causes economic analysts to make conjectures that are directly related to the exchange rate. For example, Argentina is expensive in dollars, the exchange rate is delayed or it must be devalued to accommodate returns.

Argentina is showing a structural change in economic matters, launched by the State, but which seems insufficient if we look at the behavior of the economic agents, who continue to think as if we were governed by a populist government.

In the current scenario, the government adjustment will also have to make corrections to lower the Argentine cost, this must occur through lower taxes by the State, and an increase in investment by the private sector. The companies They must make the effort to go to scale to increase the units produced, lower unit costs and try to gain space in a highly competitive market.

The Government, sooner rather than later, will have to take the path of lowering taxes. Adjusting the economy via competitive devaluations was not a solution in the past, it will not be a solution in the present, and much less in the future. If someone thinks I’m wrong, look at the exchange rate of the real and the Mexican peso in recent years, far from having currencies that are devalued, they have been revalued, and companies had to bet on greater competitiveness, investment and innovation.

In both countries the interest rate is positive against inflation, and to be profitable companies must go on a large scale. This is what is coming for Argentina.

Conclusion:

• Devaluation is by no means the solution to the problems of the Argentine economy. The solution is to lower the tax pressure, but first we must reduce public spending.

• Argentines in the past bought dollars as an act of repudiation of the terrible administration of the state by the political class. If the political class currently has a fiscal surplus, this should not be repudiated by buying dollars, it should be supported with investments. NEITHER pesos, nor dollars, an economy in motion.

• Spilling liters of ink saying that Argentina is more expensive than the world will get us nowhere, we must explain that the repeated devaluations made us very poor, and that, if we want to get out of this problem, manage the State better, lower taxes and reduce expenses is the best option.

• Being efficient is a titanic task, a change in the economic plan causes new winners and losers to appear, reinventing yourself, rebuilding yourself and interpreting the new market is essential to remain in the business world. Capitalism needs winners and losers, if it weren’t like that it wouldn’t be capitalism.

• Anyone who continues to complain that the prices are expensive will pay more in the future. 56% of the population voted for a dollarization proposal that is a stage higher than convertibility. Most businessmen experienced convertibility and knew that it would force them to have more scale and efficiency. Those who did not know about convertibility had the opportunity to study it since there are an infinite number of books that depict life in the 90s.

• Today we have a president for 4 years, the music changed, and we have to change the pace. The dollar is no longer a currency object of desire, we are going to have inflation in dollars that points to 40% or more by 2024. The more you keep the dollars, the more you are going to lose, money laundering is a possibility for those who have money undeclared, anyone who has it declared and is not activated is already losing purchasing power.

• Sovereign bonds were once worth US$18, today they are worth more than US$50, wake up, because a sleeping crocodile is a wallet.