At the close of his opening speech of the legislative year,
Javier Milei
launched the proposal to sign
"The Ten Principles of the New Argentine Order"
in May with governors and legislators .
The President thus put on the table the discussion of a set of foundational principles for an Argentina that is going through one of the deepest crises in its history.
Non-seizure property
,
non-negotiable fiscal balance
, limit public spending to 25% of GDP;
a tax reform to reduce tax pressure, another labor reform to favor formal work;
discuss co-participation;
pension reform to enable
private retirement
;
a political reform;
A commitment
with the provinces to advance the exploitation of natural resources
and the opening to international trade constitute the core of the initiative launched by Milei.
But in the short term, and in economic matters, the definition that
"the fight against the fiscal deficit is the mother of all battles"
is consolidated as the core of Milei-Caputo's management.
And it is complemented by two presidential concepts referring to the recognition that the bulk of the January fiscal surplus was based on
liquefaction
(due to the inflationary jump, the purchasing power of pensions, salaries and deposits in pesos was liquefied) and some "chainsaw" over "caste."
A key question these days is how the fiscal adjustment will continue, since according to the IARAF calculation "the national tax collection for the first two months would have decreased by 7% real year-on-year."
Doubts regarding the sustainability of the adjustment in public accounts will remain taking into account that
the power to reduce public spending through liquefaction is losing strength
.
With his 10 points, President Milei tries to build a
political bridge
to navigate what he considered the most difficult period of adjustment.
Between March and May, the Government must demonstrate that it can lower
monthly inflation to single digits,
while presenting exporters with an interesting real exchange rate so that they can liquidate
corn and soybeans
.
Taking into account, also, that a ton of soybeans is trading slightly above US$400 when a year ago it was above US$500.
The path is narrow: the stable dollar would help calm the cost of living index, but not encourage exports.
Furthermore, an important restriction now clearly emerges for the recovery of the economy in the short term, which has been brewing for some time, and is given by
the growing exposure of the banks' portfolio to the public sector
.
Two reports, one from Dante Sica's Abeceb and another from Daniel Marx's Quantum, focus on the problem.
Abeceb says that "the situation exhibits a restriction that will act as
a dead weight in the recovery
: practically the entire supply of bank deposits is placed in public debt and
there is no credit
either to finance working capital or to feed the demand for durable goods and investments.
This result was reached after years, as Quantum points out, maintaining that "between the end of 2019 and 2023,
total loans to the private sector" fell 37% in real terms
(those in pesos by 27% and those in dollars by 66%). %) while exposure to the public sector rose by 113%".
With the banks' portfolios full of State bonds (Leliqs, repos, bills with Central puts, Treasury bills, etc.) it is difficult to think of a jump in the level of activity in the shape of a "V" (hitting a floor and it goes up quickly).
From the regional comparison it emerges that while in Argentina loans to the private sector represent 6% of GDP, in Uruguay they reach 26% and in Chile and Brazil 83% and 72% respectively.
Of course, credit is trust and President Milei's strategy to generate it is very controversial: he focuses on achieving balance in public accounts but, simultaneously, he plays with fueling a quake in political matters.
Gita Gopinath
, the IMF deputy managing director who visited Argentina and met with President Milei and Minister Luis Caputo, highlighted the Government's initial progress in restoring macroeconomic stability, but suggested "
proceeding pragmatically
to ensure social and political support." which is essential to guarantee the durability and effectiveness of the reforms".
Probably the President and the minister could respond with the rise in dollar bonds (from US$25 they jumped to US$45 in a matter of weeks, or with the fall of the blue dollar which, hand in hand with a powerful shortage of pesos , is at $1,050 when in January it had touched $1,255.
And
that is confidence
beyond the doubts that persist about the sustainability of the fiscal surplus in January (it has not happened since 2012) which was the product of a 39.1% drop in spending "accompanied by a collection that remained constant in real terms ", according to Abeceb.