The oxygen that the electoral result gave to the Government in an election that seemed like a turning point in the previous weeks in the useful life of the economic program offered a parenthesis in what seemed inevitable: the turn that it was forced to make in order not to be once again on the brink of an abyss. What marked the end of the last “phase” of the plan was not a drought, a hyperinflationary process, growing poverty or a jump in the unemployment rate. On the contrary, what marked the end of the “phase” in advance was something out of control: the shortage of dollars.
From green to Excel. The obvious lack of foreign currency was reinforced by the urgency of facing debt obligations without being able to turn to a capital market that turned its back on a Government that always needed more funds to be able to fulfill its main promise, which was to slow down inflation. Two rescues in six months were not enough to ward off the ghost with a somersault, until the net appeared. As the economist explains Fernando Marullthe “markets” had anticipated an unhappy ending for the Government, punishing bonds and stocks and in a single day they corrected that miscalculation with a record rally in those same assets that previously had no floor.
The support that the United States Treasury had given to the administration headed by Javier Milei would have come to nothing if the result had been what financial operators expected. Its rationale was that the Government would not have sufficient legislative support not only to undertake the promised reforms but also to defend itself from more frontal attacks than those suffered until now.
The key was in the “suggestion” formulated by the “guarantor” of the resistance himself: Secretary Scott Bessent himself. In short, they had to use North American support to advance in providing political sustainability to the economic plan, with the changes and negotiations that were necessary. With the figures from Sunday, October 26, translated into seats in both chambers, the panorama changed from absolute pessimism to moderate optimism: without its own majority, The key is to be able to weave a network with those who have the missing seats: governors and non-Kirchnerist Peronist groups.
The Government marked three priority reforms that it could not successfully address in its first half of administration: tax, labor and pensions. Until now, only patches have been produced in this matter because changes are slow but inexorable. Almost half of the workers are informal or self-employed; The Argentine tax system has a very high fiscal pressure but only for the 60% of the economy that is blank and the Argentine pension system is one of the most inclusive in the region, but it is expensive and inequitable. A package of reforms that is frightening in its size andThe consequences that it could bring to an economic system that is not fully established.
As time sets its pace, some events should occur before December 10: the first is the agreement to deal with the 2026 national budget duly sent by the Executive Branch and which only on Tuesday, November 4, obtained, with just enough, the endorsement of the respective commission, to be dealt with on the premises. Thus, a difficulty was overcome, which was to discuss it with the current composition of Deputies and not with the incoming one, much more favorable for the ruling party.
After two periods in which only the previous budget could be extended, with the difficulties of projecting figures with the abrupt changes in relative prices that had occurred, agreeing on nothing less than the calculation of expenses and the forecast of national income implies substantial agreements with the provinces and other groups with less legislative representation. Argue once and then achieve a consensus that was conspicuous by its absence in this election year.
Part and distribute. The budget project The Executive Branch estimates a growth of 5% in GDP, an inflation of 10.1%; an exchange rate of $1,423 per dollar by the end of 2026, with a primary fiscal surplus of 1.5% of GDP and a financial surplus of 0.2%. For its part, the IMF recalculated its estimates for Argentina: growth of 4% and inflation of 16% by 2026.
The governors are concerned about three issues that in these years were an adjustment variable of the official chainsaw and altered its balances: the distribution of special funds, the flow of public works in the provinces and the persistence of local taxes to solve the drop in income.
The distribution of co-participating funds had a slight improvement in the first ten months of the year. According to estimates by economist Nadin Argañaraz, president of the IARAF, it improved 2.3% in real terms. It is a relevant variable because, according to these same calculations, the Argentine consolidated tax collection from the application of the federal tax sharing law and an assumption of municipal sharing, of every $100 collected during the year 2025, the National Treasury would receive $25.7; ANSES $28.1; Provinces and CABA $33.7 and Municipalities $12.5. The counterpart is the tax collection itself, highlighting that more than 40% of the average economic activity is informal, with notable sectoral differences. Argentina’s consolidated tax collection has a relative weight of around 29% of GDP and is concentrated in relatively few taxes: 94% of Argentina’s consolidated collection is concentrated in ten taxes (eight national, one provincial and one municipal). But if we take only the six most profitable (in order of collection they are: VAT, Social Security, Profits, Gross Income, Bank Debits and Credits and Export Rights) They represent 84% of the total. A major challenge because, at least half of them are considered harmful and with a marked anti-productive bias (Gross Income, Bank Debits and Credits and withholdings).
The boxes. The other problem that recurs is the deep red of the pension funds of the 13 provinces that decided not to transfer them to the Nation during the retirement reform of 30 years ago. In this way, specific allocations from the National Treasury were established through which funds are derived from co-participating taxes to reinforce the financing of social security. In an estimate made by the Mediterranean Foundation precisely for your Legislative Support Program (PAL)these specific allocations imply a loss of resources for the provinces as a whole. 1.5% of GDP, of which almost one point is contributed by provinces that maintain their pension systems. The payment of these benefits is a high and growing component of current public spending. “Between 2005 and 2024, pension expenditures grew at a rate of 3.4% above inflation, going from representing 15% of primary current expenses to 19%”they stand out. Extreme cases are those of Entre Ríos and Santa Cruz, in which the payment of pension benefits represents a quarter of current expenditures. The greater permissiveness and generosity of these provincial regimes compared to the national one and the existence of many public services with specific regimes (security, teaching or justice, to name the most relevant) explain why a decision that has been in place for three decades now takes its toll. But, above all, it adds one more issue to the menu of negotiations to achieve what seemed like a utopia a few weeks ago.: a budget that, in addition to “closing” without a deficit, is realistic and has enough support to become the “law of laws.”
