MercoPress. South Atlantic News Agency

Argentina's finances and spending on the electoral trail

It's electoral time and Argentina's government spending has reached a 24% of GDP, which is considered a record and several points ahead of the vilified administration of former president Carlos Menem, 21% at its peak, and who has been blamed for much of Argentina's recent shortcomings, points out the Buenos Aires press.

Supporters of president Nestor Kirchner administration argue that revenue is currently far greater and this helps to explain the primary surplus, equivalent to several percentage points of GDP. But this does not contemplate that fiscal pressure in Argentina has reached record levels of inventive with the tax on checks (virtually all banking movements) plus levies on booming commodities exports from the rich pampas. Mrs Kirchner who next Sunday will almost certainly be voted in as the first elected woman president of Argentina has promised during the campaign trail fiscal prudence, which is hard to for see given the web of subsidies and compensations organized by the Kirchner administration to ensure that the Consumer Price Index and its mathematics, effectively remains below the two digits, in spite of a much higher inflation factor feeling when Argentines go out for their daily shopping. This week the Argentine government announced that the primary surplus in September reached 3.2 billion pesos which is 43.6% higher that the same month a year ago. However the Argentine financial media point out that the sum includes 2.3 billion pesos in transfers from the private pensions' scheme to the government system. If this sum had not been included (which has been done for the last four months running described as genuine revenue) the September primary surplus would had been 855 million pesos compared to the 2.2 billion of a year ago. And the reason for this significant drop can be attributed since the second quarter of 2007, to the bourgeoning government spending parallel to the electoral campaign of Mrs Kirchner. In September only it jumped 45% compared to a year ago. In practical terms this means that government spending in September exceeded the 16.7 billion pesos collected in taxes, with spending 32% above the same period last year. At this rate points out the Argentine financial press the positive gap is rapidly eroding and sometime in early 2008 expenditure will overtake revenue. Kirchner administration officials admit the tendency but also describe it as circumstantial obviously "linked to the presidential campaign", which should be drastically cut on Sunday, if there's no run off, following on very clear instructions from President Kirchner. The official data presented by Economy Minister Miguel Peirano to President Kirchner shows the September primary surplus at 3.2 billion pesos, boosted by higher tax revenue and the social security transfers. Official data also shows that among the strongest growing outlays figures social security following the anticipated pension scheme and moratorium for back payments (decreed six months ago) which were equivalent to 4.3 billion pesos plus another 1.92 billion pesos of subsidies to transport and energy.