New Peronist Economic Plan Will Lead to Argentina’s Downfall

More taxes, restrictions, and increased social spending: Argentina's new government's economic programme is doomed to fail

1,042
The V Peronist. Cristina Fernandez de Kirchner shared the image on her official account during the swearing-in of the new authorities in the Chamber of Deputies last week. (Twitter)

Spanish – Argentina will not have an “economic plan,” but it has something similar called an “emergency economic plan,” which is nothing more than a first step in the wrong direction. After the presentation by the cabinet of Alberto Fernandez and Cristina Kirchner, the primary guidelines of an initial program to solve the problems of the legacy of Kirchnerism (2003-2015) and Macrism (2015-2019) were made public. As expected, this is the firefighter who comes to put out a fire with gasoline.

“The limit of four pesos per American dollar, established in article 2 of Decree No. 793 of September 3, 2018, and its amendments,” with these words, which appear in Decree No. 37/2019, the new President Alberto Fernandez applied a new tax on the agricultural sector. “The export duty rate established in article 1 of Decree No. 793/18 and its modifications will be 9%,” states the text published in the Official Gazette.

The regulations will affect exports of meat, wheat flour, rice, peanuts, milk powder, corn, and pulses. In the case of soya, the “import duty” is increased from 18% to 30%.

Former minister and liberal economist Ricardo Lopez Murphy harshly criticized the measure as soon as it appeared in the media:

If you want to grow again, you can’t raise taxes on the productive sector, the sector that generates wealth in Argentina. The central theme of modern societies is how wealth is created. Poverty is the natural state. In other words, if we do nothing, we become more impoverished.

The liaison table of the agricultural sector called for a meeting this afternoon, where they will discuss the steps to follow. The famous “conflict of the countryside” that occurred during Cristina’s government seems to be on the verge of being reissued in a new delivery. At that time, Kirchnerism lost the vote in the Senate, and the project of “mobile retentions” that had been raised did not go into effect.

The “foreign currency purchase tax” scam

From this moment on, if an Argentinean wants to acquire foreign currency for hoarding or trips abroad (whatever he can obtain before the current exchange control), he will have to pay a 30% “tax.” Logically, it also applies to purchases made outside the country with a card. The measure, which will surely have an impact on the “blue” exchange rate (free black market dollar), is nothing more than another fraud on the part of the state. The purchase tax has no other purpose than to discourage the purchase of foreign currency so that people have to hold on to the increasingly devalued Argentine pesos.

The new government sold this news optimistically talking about the supposed impetus that tourism in the country will receive. Another of the most critical traps of this measure appears in international trade: exporters, when liquidating, in addition to the withholdings -which have just increased considerably-, what remains of the transaction is weighted to the official dollar — a scam by any measure.

The old Peronist “double indemnity” delirium

The cost of firing an employee in Argentina is undoubtedly one of the main reasons for unemployment and precarious work in the country. Instead of going towards a strong labor flexibilization that generates a formal employment shock, the Fernandez duo, as part of the “emergency,” declared that for the next 180 days, if an employer decides to dismiss an employee, he will have to pay double. The measure, which can effectively postpone or prevent some layoffs in the short term, makes it more impractical to hire new staff, especially in small and medium enterprises.

It would be interesting if the government could take the opportunity to say what it will do after 180 days when these exceptional (and counterproductive) measures cease to be in force. But knowing Argentina’s history, instead of the definitive program, which proposes a radical change that frees the factors of production, the only thing we will see is the “continuation” of the emergency. For now, the future (at least in the short term) is the deepening of the current decadence.

Subscribe free to our daily newsletter
Sign up here to get the latest news, updates and special reports delivered directly to your inbox.
You can unsubscribe at any time