Monday, November 30, 2020
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OP-ED | 11-01-2020 11:01

Flavour of the month

One month in office warrants a summary – it is too early for a report card.

President Alberto Fernández marked his first month in office yesterday, which offers an early opportunity to take stock – early at the risk of being premature because no government either succeeds or fails in its first month, least of all when punctuated by the festive season and summer holidays. That overused word “honeymoon” is often slapped onto that period but does not apply here – if Fernández ever had one, it was between his August primary and October election victories, more than his time as president-elect.

Even if Fernández did not hit the ground running as hard as his predecessor Mauricio Macri (who freed the exchange rate and scrapped almost all export duties within days), he has been far from inactive and his initiatives warrant an overview.

The first news flash was giving shelter to leftist Bolivian ex-president Evo Morales on the second day of his presidency. But just one week after his inauguration the brand-new administration sprang into action on the key economic front by announcing a ‘Social Solidarity’ package (to abbreviate its cumbersome title), which dominated the agenda through into the New Year. A major shift, because during the election campaign Fernández had been presenting as his grand solution a multi-sector Socio-Economic Council (yet to take shape) which would work out a wage-price agreement to bridge the first half of this year – a consensus approach perhaps aimed at wooing Roberto Lavagna voters. But now the crisis has been used to grant the presidency powers of emergency decree, a move which places both the provinces and Congress very much in the back seat.

After blasting the government’s “austerity” throughout the election year, this package actually takes Argentina faster down that road than Macri’s gradualism. A government dubbed populist is seeking to trim public spending by some US$9 billion – two-thirds via higher taxes and a third by no longer index-linking pensions. This serves a front as crucial as the domestic economy – namely debt negotiations – since it prompted the International Monetary Fund to speak this week of Argentina as “moving in a positive direction.” Even if such moves as freezing transport fares for four months, the 4,000-peso pay bonus and the plans against hunger might erode the planned savings, the package is viewed abroad as fiscally neutral at worst and thus responsible – more important for now than the sporadic “virtual default” noises from leading government figures.

Yet Fernández would resist any comparison with Macri’s austerity, because the burden is not spread across the board but confined to specific targets, robbing the rich to help the poor – upper income brackets, tourism abroad (via the 30-percent surcharge on overseas spending), dollar-earning exporters (with export duties sharply hiked) and pensions above the minimum. Social justice in theory but while an economist might question the long-term damage to trade, investment and savings from currency controls, export duties, lower interest rates and a general transfer from the most to the least efficient sectors, the package might not always be fair in other terms. Restoring IVA value-added taxation to basic food items hits modest incomes not covered by the Plan Against Hunger. Limiting hikes to the pension floor (as practised between 2002 and 2009) penalises those who paid their contributions – France today shows how traumatic a process pension reform can be. Meanwhile, Buenos Aires Province Governor Axel Kicillof complains that the amendments to his tax reform have let the super-rich off the hook at the province’s expense but the hard figures say that the peak 75-percent increase applied to 2.6 million tax-payers in the original bill, but is now scaled down to 600,000 – are millionaires really to be counted by the millions in BA Province?

This strictly domestic and economic focus has only been supplanted in this week by such international issues as Iran and Venezuela – in all other areas everything remains at the level of statements of intent, such as legalising abortion. But then, one month in office warrants a summary – it is too early for a report card

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