Economy Minister-designate Luis Caputo's economic team began to focus on the primary deficit and the size of energy subsidies. The men of the man who will lead that portfolio from December 10 have already visited the current Secretary of Finance, Raul Rigo, twice in recent days to consult him about the inheritance they will receive in fiscal matters when they land in the portfolio headed by Sergio Massa.
In the meetings, Martín Vauthier and Felipe Berón confirmed that the public accounts will close with a primary deficit of at least 3% of GDP in 2023, 1 point more than expected by Sergio Massa due to the "platita" plan and the lower collection due to the relief in the Income Tax. That data is key for the budget that will be discussed in extraordinary sessions and a challenge to reach fiscal balance in 2024.
Economists at Anker, Caputo's consulting firm, aren't the only ones interested in knowing those numbers. The IMF is also on the lookout. On the U.S. tour. In his visit to the U.S. last week, in which he sounded out financial support, Caputo confirmed before the agency that the fiscal adjustment to stabilize the economy and reduce inflation will be much higher than the 1 point agreed by Massa for 2024.
Milei tasked him with a cut of between 5 and 6 points in public spending to reach the "zero" fiscal deficit. The objective is to cover the 3 points of the primary deficit and 2 points of debt interest, an initiative of a magnitude with little precedent. For example, Ricardo López Murphy's team proposed an adjustment of 0.7% of GDP in 2001, a tenth of what is proposed now.
On the spending side, Caputo's men asked Rigo for data on energy subsidies, which today account for 2% of GDP. In particular, they focused on the wholesale administrator of the electricity market, Cammesa. That company subsidizes the rates of the electricity bills. With tariff segmentation, there were increases in those bills of up to 500%, which reduced transfers to the firm.
In the first 10 months, the administrator received $1.400 billion, up from $000.1 billion last year. In nominal terms, it grew by 050%, but if inflation is discounted, spending fell by 000% in real terms, according to the November report by the Observatory of Tariffs and Subsidies IIEP (UBA-CONICET). The other reason for the drop is because international prices have fallen.
The team of Macri's former finance minister fears that they will find hidden expenses, but Massa's administration assures that the numbers are transparent. Public works (1.8% of GDP) is one of the main items in the crosshairs. The idea is to leave those in progress standing and stop the new ones, which is already generating tensions with the chamber and the construction union.
Another item that will be the core of the adjustment is transfers to the provinces (0.6% of GDP), in particular, the Transitory Contributions of the Nation (ATN), a discretionary item that includes subsidies, social assistance, health and education funds. That chapter, together with spending on national programs for the provinces, would add up to about 5 points of GDP.
The governors agreed with Massa last week to transfer $230 billion to pay bonuses and salaries. The governors thus responded to Milei's call to adjust spending ("there is no money"), despite the surplus that most provinces have, according to official sources. Those close to Caputo, too, know that "you can't cut everything."
Five days before taking office, one of the biggest challenges facing the president-elect is to find a technician who wants to take charge of the Ministry of Finance, the heart of the chainsaw. From a list of several candidates, none accepted the offer, including FIEL's chief economist, Daniel Artana, who will have a stake in another area.
Rigo, on the other hand, denies having received proposals and will leave public administration, after almost two decades in different administrations. The difficulty in filling boxes occurs in the midst of strong fights between libertarians, Macristas and ex-Menemists. Indeed, some of those who declined his candidacy fear becoming fuses in a "transitional" squad.