“SUPER-VAT” TO ELIMINATE PROVINCIAL AND MUNICIPAL SALES TAXES

The exchange rate appreciation set the urgency to address the severe competitiveness problems suffered by domestic production. An essential step is to go forward with a tax reform eliminating the provincial and municipal sales tax. The best way to do it is to absorb both taxes with a “super-VAT”.         (more…)

INFLATION KILLED THE SERVICES PROMISES TO DISABLED PEOPLE

Disability assistance operates under a complex set of rules that promise many benefits without contemplating how to finance them. The adjustment occurs by updating the price list of benefits below inflation. The main consequence is that many disabled people are left without coverage.   (more…)

REAL WAGES FELL BY 25% IN THE LAST DECADE

In the context of productive stagnation, high inflation caused a strong reduction in real wages, which allowed maintaining the level of employment. In the new scenario of stability, if no progress is made with economic structural reforms, the adjustment will inevitably affect the level of employment.      (more…)

IMPROVING COMPETITIVENESS WITHOUT REDUCING TAXES

The exchange rate’s proximity to the band’s floor reduces its inflationary impact but maintains competitiveness problems. Since it is very difficult to lower taxes without affecting the fiscal balance, the solution is to replace taxes that erode competitiveness with taxes that do not.        

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MORE IMPORTANT THAN THE EXCHANGE RATE BAND IS THE MAY ACT

Exchange rate easing is a sensible response to currency appreciation. It is likely to have a negative, but controlled, impact on the disinflation process and recovery of production and incomes. Nevertheless, the weakest aspect of the announcements is the scant references to the structural reforms of the May Act.        

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ONLY 9% OF ARGENTINE EXPORTS GO TO THE USA

The direct impact of Trump’s protectionist measures on Argentina is limited. However, the indirect effects can be very negative. The best strategy is not to copy protectionism but to deepen reforms, including the free trade agreement with the European Union.        

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MORE IMPORTANT THAN THE EXCHANGE REGIME ARE THE REFORMS

Probably the main obstacle to the signing of the IMF’s agreement is the government’s reluctance to modify the exchange rate regime due to the impact it could have on inflation. The way to reconcile positions is with a shock of structural reforms as proposed in the May Agenda by Argentina’s government.        

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EMPLOYMENT PROBLEMS ARE MORE OF QUALITY THAN OF QUANTITY

The unemployment rate remained relatively stable, but this is due to lower quality jobs than to job growth. This fact shows that the most important thing is to speed up the structural reforms. In the case of jobs, it means the modernization of labor institutions.        

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THE REQUIREMENT OF 30 YEARS OF CONTRIBUTIONS MUST BE ELIMINATED

At the end of the month, the pension moratorium expires. It must not be renewed, but it is not a good idea to let it expire without doing something. The requirement of 30 years of contributions to receive a pension must be eliminated. This is the first fundamental step towards an integral organization of the pension system.        

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FOR EVERY 1% INCREASE IN GDP, IMPORTS GROW 3.5%

Despite the good fiscal performance, the Central Bank’s reserves are not increasing. This is one of the main obstacles to pave the way to sustained economic growth. For this reason, it is very important to address reforms to improve competitiveness to boost exports.     

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