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Reviving the “Model” requires reducing real wages

The "model" implemented from 2003 relied on twin surpluses (fiscal and foreign). Since both were generated by the reduction of real wage, as a consequence of the strong currency devaluation, once real wages were restored to the pre-crisis level the economy stagnated. To reestablish the "model", it is necessary not only to devaluate but also to ensure that the wage increases are less than the devaluation of the dollar and inflation. Promoting public policies seeking a rise in productivity and competitiveness appears to be a more promising alternative in order to achieve growth without deteriorating real salaries.   

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Only 1 in 4 young women work

In the context of economic stagnation, the negative social consequences of low institutional quality are evident, such as the barriers which discriminate against youth employment, especially women. While in developed countries social progress relies on high rates of youth and female employment, in Argentina the entry of young to the labour market is heavily conditioned by low education, costly and bureaucratic labor and tax regulations, and the absence strategies for promoting responsible sexual behavior.   

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Argentina´s problems are not solved through devaluation

The devaluation caused an extraordinary increase in tax collection, but the increase in public spending was higher due to the strong growth of economic subsidies. As expected, the attempts to go back to the “productive model” through devaluation are failing since the current context is very different from the one on which salaries and pensions were lowered during the 2002 crisis. The deteriorating balances of the companies providing public services due to the devaluation will require higher economic subsidies.  

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Federal goverment pays only 7% of the teacher’s salary

The federal government is decisively intervening on the teachers’ salaries negotiation, but provides a marginal and shrinking proportion of the remuneration. This contradiction generates the conflict, leading to the irrational situation where even provinces that have reached agreements with the unions are not beginning classes either. Instead of interfering in the wage negotiation, the federal government should support financially the provinces in order to reduce teacher absenteeism and droppouts, and to improve quality education. 

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Future goverments will pay 90% of YPF’s nationalization

The Argentine government will finally compensate for the nationalization of REPSOL YPF. Although the announced compensation will be of about U$S 5 billion in bonds, when the high implicit interest rates are computed the total costs rises to more than U$S 10 billion. In addition to the elevated amount, the bulk of the payments will be faced by future administrations. This is another clear testimony of opportunistic decisions made based on unprofessional criteria that compromise the welfare of future generations. 

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More in spent in subsidies to Aerolineas Argentinas than in basic education

Faced with the dollar instability, the authorities announced their intention to revise economic subsidies. Apart from being a delayed response, the initiative was put as a threat to those who seek to protect their savings by buying dollars instead of a fair and rational policy in the allocation of public funds. The general rule should be that tariffs are in line with the costs of public services. In parallel, it is needed to implement social tariffs so that poor households in the whole country (not just those living in Buenos Aires) will be the only ones receiving subsidies.

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Central Banck reserves are only 22% higher than in 2001

The Central Bank doubles 2001’s reserves in nominal terms, but once adjusted for price inflation in imports, they barely surpass the level they had when convertibility fell. The aggravating factor is that the import ratio (percentage of imports relative to the GDP) doubles the one that prevailed in 2001. This demonstrates that the currency crisis that Argentina is suffering now is severe, and demonstrates the need for a change in policy strategy. 

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Less than 1 in 6 young people have formal employment

Due to the persistent drainage of reserves, authorities announced a new exchange rate policy together with a new social program, called “Progresar” which intends to alleviate the marginalization suffered by millions of young people.  Authorities are still unaware that exchange rate volatility is associated with excessive and badly managed public spending and that the only viable solution is a deep public sector transformation. Nevertheless, more alarming is the idea of inducing thousands of young people, in the beginning of their productive life, to become dependent on state paternalism.

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In Brazil, Chile and Uruguay the dollar is dropping

The rise of the dollar in the black market causes uncertainty and concerns. The main cause of the exchange rate instability is the accumulation of mistakes in the management of public expenditure. Redundant employment, the massive granting of pensions without contributions and subsidies to companies have generated a level of public spending that even the record tax burden is unable to finance. The deficit induces spurious emission that produces monetary inflation and leads people to buy dollars in the black market to protect their savings. With a more intelligent public expenditure management, neighboring countries have much more important concerns than the value of the dollar. 

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Public consumption grows at a 30% annual rate

Prolonged blackouts, high inflation and the accelerated loss of reserves are all signs of deep macroeconomic imbalances. The energy crisis will not be solved by fining utilities, neither inflation will be stopped by announcing price agreements, nor the reserves will be recovered by discouraging traveling abroad. The key issue is to restore the macroeconomic balance by stopping the exacerbated growth of public consumption led by economic subsidies and redundant public employment. 

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