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Montevideo, October 3rd 2023 - 14:56 UTC
Argentina's economic activity expanded in December as retail sales and manufacturing advanced, while the country posted a trade surplus in January that almost tripled the surplus the same month a year earlier. Read full article
These promising economic results started building up from the very moment Alberto Fernandez took office early December.
In contrast, we remember well how Macri government officials (and some cheerleader participating in this forum) explained that we got to wait till the next semester, or then vice-president Gabriela Michetti's analogy the light at the end of the tunnel, the tunnel symbolizing the penury suffered by the Argentines and the light being a hypothetical, bright future.
It is true that the government of Alberto Fernandez will face huge challenges during its term; however, what's required is that steps in the right direction are taken and that the population understands the limitations the country faces in light of the unprecedented debt taken by the previous government that did not add up to the economy but was instead used for dubious purposes, capital flight being one of them.
Sounds good, but it would be unusual for a new government to have an effect so quickly. Did AF do something to make imports drop so drastically, or was it the natural result of inflation and depreciation of the currency?
Indeed. It is a short-term thing, partly based on better hopes encouraging citizens to spend a little more.
Other stimulants may be bonuses and pension increases granted to lower-income retirees as part of emergency measures taken by Alberto Fernandez, as well as the distribution of a card to lower-income families allowing for the purchase of (only) food items -- all or most of which is immediately spent, increasing retail sales.
As for the slight trade surplus, it is mostly a result of a steep reduction of imports as a result of the ongoing recession deepened by Macri's application of IMF-mandated measures expected to reduce the fiscal deficit.
As for the IMF declaration, I hear it is the first-ever time this organization has ever acknowledged that a debt is unsustainable, that cannot be repaid and called on private lenders to make a 'meaningful contribution.' Of course, the Fund is perfectly aware that it lent a record amount of money without a customary technical assessment to a clearly inefficient manager such as Mauricio Macri. The Fund also violated its own statutes when it granted the loan when the signs were clear that a significant portion of the funds were spirited out of the country thanks to the dismantling of regulations addressing capital flows.
Argentina's exports have been growing rapidly since the year 2018. The net growth of Argentina's exports was 7% during year 2019. Due to the recession, the export-import margin has been much higher.
Significant growth is expected during year 2020 leveraged by the export tax reduction/elimination policy of the government of Mauricio Macri.
Unfortunately, during the last year of the presidency of Mauricio Macri and, much worse, in the months of the presidency of Alberto Fernandez the tax burden on exports returned.
Currently, with the increase in withholdings on all exports (30% of taxes including industrial exports) and the illegal tax for the existence of a fictitious official dollar (another 30%) it is difficult to imagine that a sustained growth of Exports, as happened in the year 2019.
In these last months, friends of mine who live in Argentina, inform me that it is impossible to import any product due to the restrictions existing in Argentine Customs' House since Alberto Fernandez assumed the presidency.
The elimination of what you call tax burden on crop and mining products exports by former president Macri dramatically reduced funding for the state and that is why Macri himself restored them later. But this was not all. Macri allowed exporters NOT to repatriate the dollars they got outside the country if they so pleased.
The elimination of import restrictions by the Macri government allowed for a continued flow of dollars out of Argentina. Worse yet, all restrictions on capital flows allowed a Carnival of financial speculation known as carry trade or la bicicleta financiera: Dollars were brought to the country, changed to pesos, make a kill thanks to ski-high interest rates, then converted to dollars again and then fly away.
Then you wonder why the country is in crisis now.
It is quite clear, without any doubt, that if you want to promote exports, taxes are taken out. If you want to curb down exports, you apply taxes penalizing profits.
Mauricio Macri eliminated export taxes and they grew, and it was a big mistake of Macri government, forced by the fiscal deficit, to reapplied them.
If any government runs out of financing, it must, like people or companies, reduce its spending to be economically sustainable.
Today, every exporter, whether basic products or industrialized, pays taxes for export. Clearly a big strategic mistake that will impact foreign trade very soon.
I was just reading in an Argentine economic on line newspaper. And the following concepts appear:
In 2019, exports had increased 5.4% compared to 2018
”In January 2020 the balance of trade balance showed a positive balance of USD 1,015 million, almost tripling the positive balance of a year earlier. However, this phenomenal increase in foreign exchange surplus is not due to a large increase in exports, since that fell 0.8% year-on-year, but the decline in imports continued (16.1%), the result of the great recession that hits the Argentine economy.All items had casualties, but the one that fell the most was parts and accessories for investment goods, which would be showing the destruction of capital stock the country is having. ”
Summing up: In January 2019, exports had increased 5.4% compared to January 2018. In January 2020, exports fell 0.8% in relation to January 2019.
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