Minister Guzmán’s announcements about the agreement with the IMF seem more like a prayer to the Virgin Mary that something can be achieved. It is that too much voluntarism is observed in the proposals and quantitative goals that are quite complicated to achieve considering where we come from and how they are going to face the problem.
The first point to consider is the curiosity of the heart of the proposal. The minister said that there will be no adjustment, referring to the drop in public spending. On the contrary, they plan to increase it with more public works. But at the same time there will be no tax reform, labor reform or any structural reform nor will they touch the spending of 3% of GDP on economic subsidies. The minister’s proposal is that the reduction of the deficit will go through the growth of the economy. In other words, the economy will grow more than public spending.
The minister said that there will be no adjustment, referring to the drop in public spending. On the contrary, they plan to increase it with more public works
Said more directly, they copy the Cambiemos model with the gradualism that failed and left it hanging in the brush in April 2018. Precisely, Cambiemos bet on lowering the fiscal deficit as a percentage of GDP due to the growth of the rain of investments that never came and, On top of that, when the accounts did not close, they carried out more public works believing that, in the Keynesian style, the works reactivate the economy, an absolutely wrong decision because nobody starts to reform the house when the money is not enough to make ends meet. and on top of that, it takes on debt to be able to finance these reforms. There comes a time when he cannot pay the credit and keeps the reforms but without the house because it is auctioned off for non-payment of the debt.
This idea of lowering the deficit without lowering public spending, without structural reforms and increasing spending on public works looks more like a prayer to the Virgin Mary than a serious economic proposal to reduce the fiscal deficit.
Minister Guzmán did not dedicate even half a line to say how they are going to solve the problem of the quasi-fiscal deficit that already includes almost $5 billion of debt in LELIQs and Passes and that last year generated a fiscal cost of 3% of GDP.
If the accounting drawings are maintained, then it is not credible that the monetary issue will fall to finance the treasury in 2022
The primary fiscal deficit last year was 4.2%, not including SDRs and profit transfers, which are an accounting invention, with which it is not very well understood how they are going to lower the primary fiscal deficit seriously and without drawings accounting, from 4.2% of GDP to 2.5%. If the accounting drawings are maintained, then it is not credible that the monetary issue will decrease to finance the treasury in 2022.
Let us remember that the monetary issue was the main income of the treasury in 2021, representing 4% of GDP. Lowering it to 1% of GDP as the minister said in 2022 will be quite an achievement without structural reforms.
Talking about strengthening the internal capital market, as the minister stated, means that more internal savings can be captured with this tax burden, this unpredictability in the rules of the game and an economy that in 2021 only rebounded after the 10% drop in 2020 as a consequence of eternal quarantine.
That in 2024 the next government be fixed, if they arrive without a crisis before, is what emerges from the sayings of the minister and the President
In summary, a very unbelievable technical proposal that looks more like betting on a miracle with the intervention of the Virgin Mary and the Holy Spirit than on economic science.
It will be necessary to see if this situation lasts two more years, but clearly the bet is to leave the problem to the next government for the numbers and proposals agreed upon for 2 years. That in 2024 the next government will be fixed, if they arrive without a crisis before, is what emerges from the sayings of the minister and the President.