Despite the blockade of the DNU and the omnibus law, the shock plan seems to be advancing within the planned tracks.
After the strong devaluation and the inflationary flash in December, the Government expected a strong contraction in consumption due to the impact of the fiscal adjustment and the acceleration of the "blender", this is
a greater drop in the purchasing power of income due to the jump Of the prices.
"The chainsaw and the blender, which are the pillars of the adjustment, are not negotiated," President Javier Milei confirmed last week.
And that was what happened in the first two months of management, although it was not even for everyone: while some joint ventures achieved a certain recomposition,
retirements deepened their deterioration by falling 17% in real terms,
after having fallen 3.7% in real terms. in December (without bonus).
The blow to salaries was reflected in the reduction in spending last month and the improvement in public accounts, which made it possible to achieve the first financial surplus in January since 2012. Thus, after the mass of resources for the payment of salaries fell 10.8% real in October, 18.9% in November and 23.9% in December,
in January it was worse and plummeted 38.1%.
Although during the first month of the year spending decreases in real terms compared to December, when bonuses are paid, the liquidation of assets was due to the fact that in the last month of 2023 they increased below inflation due to the mobility (which follows salaries and collection) since
the government did not grant an emergency reinforcement in January beyond the bonus.
Retirements continue to lose purchasing power.
"The current formula for updating pensions has been liquefying purchasing power for a long time. Given that there is a delay in how the formula adjusts, in December the July-September period is taken into account, and you are under monthly inflation that is around 20 "%,
it is logical that you have less spending on retirements
," explained Francisco Ritorto, economist at ACM.
In this way, the Government moved forward with a greater adjustment in January, despite the fall of the fiscal package included in the omnibus law, which contemplated a new mobility tied to inflation from April and
"ate up" the month of January.
Minister Luis Caputo would seek to achieve zero deficit with the liquefaction of retirees, the increase in taxes (PAIS and fuel) and the "chainsaw" in other expenses.
Thus, in the midst of the fight with governors and the negotiations with the IMF,
the minister applied a strong cut in subsidies to energy and transportation
(-64% real), transfers to the provinces (-72%) and public works. (-86%).
The risk, according to the column published this Sunday in
Clarín
by economist Marina dal Poggetto, is that it is
"a megaliquation of spending that is not sustained."
In the case of wage earners, the real income of formal workers in December hit the lowest levels since the 2002 crisis. That month the main unions obtained on average increases below inflation, while in January it was the other way around.
Even so,
joint ventures accumulated increases of 38% on average in the two-month period, while inflation exceeded 50%
, according to the Capital Foundation.
The joint ventures did not recover the ground lost in January.
"Where there is the most bargaining power, which is in the registered private sector,
2024 will be the seventh year of decline in real wages (30% real decrease, 10% in 2024)
, which makes evident the low tolerance that would remain. Stagflation affects real wages and sudden inflationary jumps cause strong deteriorations," said Carlos Pérez, director of the Capital Foundation.
Much worse was the situation of those sectors without parity or updating clauses.
According to GMA Capital, in the last six years until 2023, retirements, the minimum, vital and mobile wage and informal workers took the worst part, with
a drop in accumulated purchasing power of 27.4%, 30%, 4% and 45.5%
, respectively.
For savers, the start of 2024 was not good either, since
the rate once again lost against inflation by falling 9.5% in real terms,
although less than December (12.3%).
"The Central Bank lowered the rate with the aim of reducing liabilities, in that it was successful, but it also ended up liquefying the savings of the private sector," said Alejandro Giacoia, economist at Econviews.