These are the first signs of Argentina’s new economic direction

These are the first signs of Argentina’s new economic direction
These are the first signs of Argentina’s new economic direction

For 50 years, our country has not had an engine of growth. The only thing that grew was the State and, to finance this Leviathan, successive governments resorted to confiscatory taxes, monetary emission, debt in dollars, confiscation of bank deposits and retirement savings. Argentina was, for decades, a directionless country, with nothing to drive its economy. This began to change over the past few months.

The measures taken by the government since the beginning of the liberal administration laid the foundations for a stable macroeconomy and the reduction of inflation. The fiscal surplus is the basis of the program. It produced not only a sharp drop in inflation, but also a strong realignment of the country’s capital account and twin surpluses (fiscal, commercial and current account).

These initial harsh measures began to produce results, and the Base Law will enhance them. The month of May had a series of economic indicators, including retail sales, automobile sales, cement shipments, inflation of 4.2% and other indicators that allow us to be optimistic, to which is added a strong recovery in real wages. on April. For many it is still not noticeable due to the sharp decline that the economy has had in recent months, but the reactivation has begun. The Base Law does nothing more than consolidate this process.

The approval of the law is a huge triumph for a government that has only 7 senators, 38 deputies and that did not make significant economic concessions. Together with Base Lawnegotiations will begin on a new program with the IMF that is rumored to involve disbursements close to the US$8,000 million which, together with funds or guarantees that other multilaterals could provide, would reach the figure of between US$12,000 and US$15,000 million and would allow the exchange rate to be lifted.

The RIGI will attract tens of billions of dollars in investment over this decade, primarily in the oil, gas and mining sectors. Behind these projects there will be thousands of SMEs that will be suppliers in many areas. This law is a fundamental pillar so that, in a few years, Argentine exports can double and generate the dollars necessary for a stable macroeconomy. On the labor side, the law brings benefits that reduce labor costs for companies.

However, the reactivation of the microeconomy comes from another direction. The drop in inflation and exchange rate stability are bringing a return to credit, at the same time that the government is confident of being able to reduce taxes and regulations in the coming years. On the other hand, to lower the Argentine cost, an improvement in infrastructure is also necessary through a shock of private investments. Salaries still have room to increase without causing significant inflationary pressures, although this realignment will make the decline in inflation from 4% to levels below 1% a little slower.

With the approval of the law, we can expect a sharp drop in country risk, which could be reduced even further when there is a new program with the IMF and the exit from the stocks is clarified.

Without a doubt, with the law economic growth will accelerate, benefiting all Argentines. The worst of the crisis has already passed and everything indicates that Argentina could take advantage of the enormous historic opportunity it has to do things right and end almost two decades of economic stagnation.

With the basic law, the main doubt regarding the liberal government was cleared up, which was its ability to carry out significant reforms.

Source: Ambito

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