In actuality there are economic powers we could say are the United States, China and a third economy, India.. The role played by Russia (Ex-USSR) and other European powers as well as those in the Asia-Pacific is no less important.
But let’s address a little the role of the Indian economy, where the price of urea, the main fertilizer consumed in the country, is set at the national level. Price control? At the same time, industries receive a percentage of their costs as a subsidy.
Subsidies in a country that could be a power? Yes, yes, it is clear that these questions answer themselves. Another piece of information is added, according to BCR “last March the fourth urea plant was reopened since then, with the expectation of reopening the fifth and last plant next year. These fertilizer plants, originally publicly owned, had closed between 1990 and 2002 due to high costs.” Public companies as part of the resolution to the problems of economic development.
There is a fundamental product in this productive process which is “natural gas”, a key input for the production of urea. Between 2019 and 2021, India imported oil and gas from Russia for less than $3 billion. While in 2022 this volume exceeded $31 billion, in 2023 it reached a new maximum of imports above $46 billion, the equivalent of all Argentine reserves in the central bank and more. Thus, Russia went from supplying 2% to 33% of India’s energy imports. Another role that the Russian economy has is to accompany the supply of the other power, China.
How does this impact Argentina? They went from demanding 2,737 million dollars in 2022 to less than 1,400 million dollars in 2023. In terms of tons, it went from almost 4,800,000 to 4,500,000 tons. What was shocking was that the price that was falling (May24) does not accompany the current drop in international prices. We have Vaca Muerta and we have a dependency on this plane. Will the dependency continue or will a solution be given with Vaca Muerta? Is the solution the export model that some proclaim – who said it between 2020-2023 and now also, as Alfredo Zaiat says, econochantas?
The BCR report is clear: if compared to previous years, in the 2021/22 and 2022/23 campaign, China made large advance purchases of soybeans and corn originating in the United States. This changed completely in the last 2023/24 cycle and has now deepened due to a total absence of commitments. This trade war between both countries also had its epicenter between 2018 and 2019 when it was donald trump and in Argentina Mauricio Macriand it was the moment that the IMF granted the second highest loans to our country, the first was to the civil-military dictatorship of 1976-1983, when he was Minister of Economy Martínez de Hoz. It must be remembered that Hayek, during his visit to the Ministry of Economy in 1977, recommended that public works be cut because they were inflationary.
Going back to this international panorama of two economic powers in disputes, they even resort to tariffs, imported electric cars, in the United States had a tariff of 25% and it went to 100%. If we add that China stops buying grains and begins to supply wheat, corn and soybeans from Brazil, Argentina, France or Australia. In this dispute that is not new, will Argentina import soybeans from the United States again?
The trade war between China and the United States has already had a first round, was when the Macri government, in 2018 and 2019, imported 1,700,000 and 500,000 tons of soybeans from the United States to be processed, financing the US economy because China stopped buying it and there was a surplus. There are other products in the United States that went from a 25% to 50% tariff, also linked to citrus minerals. During 2024, only 2% of the corn shipped from the United States has been destined for the Asian country, although demand remains firm thanks to the role that Mexico is occupying as a key trading partner for the American cereal.
In this context, Argentina decides to go with the Base Law to propose the Large Investment Incentive Regime -RIGI- the new potosí. They will take the minerals and other products cheaply and industrialize them in the economic center and then sell them at a high price, rule one of the mercantilist: buy low and sell high. To all this, how is our economy? We would say like the zonda wind, it is a strong wind, very dry and with a high temperature. It is produced under certain climatic conditions, during the period between May and November, in the regions located at the foot of the Andes Mountains from the province of Neuquén to Jujuy. But it comes from the WEST.
A brief description of the eco-climatic conditions: Inflation that went from 211% (Dec23) to 289% (Apr24); According to the latest salary report (Mar24): the private salary grew by 231%, the public by 183% and the non-registered private sector salary by 129%. If we take the data from March of the current year, we have an inflation of 287%. none of the salaries exceeded that. What’s more, wages in the unregistered private sector grew well below inflation.
The IDEPI-UNPAZ projection is that GDP for this first quarter will fall by 5%. Private sector employment recorded as of February of this year, compared to December 2023, already totals some 53,180 jobs destroyed. The rate adjustment also does not give respite and it is added that the pressure from the export sectors pushes for another correction of the exchange rate due to the level of international prices, in decline and with little recovery (see graph).
The Loss of purchasing power is seen in the drop in per capita consumption of beef 45 kg/inhabitant (Apr24), poultry 39 kg/inhabitant (Mar24), while pork consumption grows 17 kg/inhabitant (Apr24), the highest level in the series, according to the IDEPI-UNPAZ report on “ Apparent consumption per capita”, another conclusion that shows that the trend from 2015 (54 kg/inhabitant) to April 2024 with 45 kg/inhabitant shows a process of decline in meat consumption, replaced by pork and secondly place poultry meat. In turn, milk consumption in the first quarter of this year fell by 20%.
With adjusted salary levels that do not reactivate the internal market for recovery, and without income from foreign trade, maintaining debt renewals in pesos, a low interest rate that does not reactivate the economy and with external maturities, how will you pay the bills? external obligations with hard currency? Is that why President Milei has announced that the economy portfolio will be in the hands of Federico Sturzenegger? Another one who got us into the mega-swap and shielding (2001-2002), created the LEBAC, first lied to the “ordinary” guy in 2015 and expressed it in a press conference in the United States, and put together the government plan that It was for Patria Bullrich but ended up integrated into the famous DNU 70/2023.
If there is something that must be understood in this zone of confusion, it is that the PRO is La Libertad Avanza, its theoretical framework is the same, its economic policy too, and just as Macri lied in the campaign, Sturzenegger is another one who has no problem deceiving to the people, it is added that the Posse departure It is with a salary of $70,000,000 for being part of the YPF board. Will you resign from the board? We do not know, or he will do like Pepín Rodríguez Simón, he escaped from Justice and crossed to Uruguay and by magic he can now return to the country almost acquitted, his reward for waiting for the change of government so as not to be consulted by the judicial table during 2016-2019.
Perhaps as a result, some climate pressures are being generated that the government seems not to understand, not to recognize, as happened in the case of UNDISTRIBUTED food by the Ministry of Human Capital and an official Leila Gianni (Undersecretary of Legal Affairs of Pettovello) who It is an example of what many have been doing, entering politics with the campaign, joining Unión por la Patria and then ending up defending the adjustment and hunger of the current government. If there is no bread, at least there will be a CIRCUS of chamuyeros, econochantas, peddlers, peddlers and the wallet inspectors (Snake) cannot be missing.
UBA Economist and UNDAV Professor
Source: Ambito
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