Like a perfect storm threatening on the horizon, the word adjustment now has another connotation than the one brandished under abstract slogans. It is that the cry at the beginning of the Milei administration “There is no money” is forming a wave that is taking shape. Those who see it happen can validate its ability to destroy purchasing power, the capital accumulated in the form of savings, but, above all, due to the abrupt change in relative prices.
another scenario. The happy “chainsaw” is being applied irregularly on different segments of public spending. During last January, for example, the total expenditures of the Central Administration had a real contraction of 11.4% compared to the same month of the previous year. But not all items suffered the same fate: while capital expenditures fell by 75% in that period, current expenditures by 60%, transfers to the provinces fell by 53% and subsidies in general fell by no less than 92% year-on-year. real. ANDOn the other hand, subsidies to the transportation system increased 144% in constant values, even surpassing the bête noire of spending: the payment of interest, which thanks to the snowball with which the Treasury red was financed and the need to financing during electoral times, grew disproportionately in the last year.
The electoral promise to organize the labyrinth of compensations, transfers and subsidies, once it landed, turned out to be much more complicated than the original statement. The issue is not new since the growing fiscal deficit of the last decade is basically due to three factors: the redness of the pension system (slowly but inexorably led to structural definancing), discretionary transfers to the provinces (axis of the controversy which equates good and bad tax compliant) and energy and transportation subsidies. These three items added together accumulated almost 5% of GDP for more than a decade. And that’s where the mower goes.
Unlike what happens on the forms, behind each crossing out there are specific sectors, regions, people and interests. Carlos Melconian attributed the initial shock plan as “the blender” because it focuses on restoring relative prices, lowering spending and debt. All at the same time. The economist Marina Dal Poggetto sees it as a large field in which income distribution conflicts are resolved in five specific but linked disputes: 1) companies vs. workers (labor laws, boiling unions, etc.); 2) Resource vacuuming state vs. taxpayers; 3) National State vs. provinces (issues of tax sharing and expense compensation); 4) the change in relative prices (of some goods or services vs. others) and 5) assets vs. liabilities (how much those who work contribute vs. how much retirees earn). A little more complex, but at the same time more realistic than the classic one that pitted only capitalists and employees against each other.
The cases. The first group affected is immense: they are retirees, who will only have their quarterly adjustment in March, but based on past inflation (it would add between 55% and 60% only in the first quarter). For the economist Jorge ColinaPresident of IDESAthe option of liquidating pensions due to the inflationary outbreak is not sustainable over time. He points out as an example that in 2002 the minimum retirement was equivalent to $83,078 at December 2023 prices and throughout the year 2023 it was $127,858 at December 2023 prices. In December 2023, the minimum retirement was $105,713, which shows a persistent and profound deterioration in the purchasing power of pensions. “Given that pensions will only be adjusted in March 2024, assuming that inflation in January is approximately 20%, the real value of pensions in January 2024 will be the equivalent of $88,094 at December 2023 prices. In February it will surely be below the real value they had in 2002, that is, pensions will have the lowest real value of the 21st century.”he points out.
The other adjustment vector is the funds to the provinces. Nadin Argañarazpresident of IARAF, points out that heNon-automatic national transfers accrued in January 2024 for the provinces and CABA fell by 62% in real terms year-on-year. Only four of them had a real year-on-year increase: Santiago del Estero (44%), Catamarca (37%), Misiones (19%) and La Rioja (4%). But those actually sent fell by a real 98%, which preludes demands, claims and hardening of the already tense relationship between the Casa Rosada and the provincial capitals.
The other big headache for the Treasury is subsidies for energy consumption and passenger transport. For the Secretary of Energy, Eduardo Rodríguez Chirilloandhe amount that the State allocated to close the gap between costs and the price charged to users in the last 20 years was US$104,765 millionwith a strong increase from the periods 2011-15 (US$37.6 billion) and 2019-23 (US$27.76 billion). Both eras coincide, not coincidentally, with administrations (the second of Cristina Kirchner and that of Alberto Fernández) in which the tariff issue was elevated to the rank of a State issue; The international comparison did not make sense and the funding of the subsidy was not an expense but a social investment in inclusion. Now, it appears as the second obstacle to be attacked in the promised intention to reduce the financial deficit. Public hearings on the matter for the electrical system have already begun and the increases are cascading towards the user. The same will happen with gas and to a lesser extent with water, since AYSA had been increasing its values to alleviate its own deficit.
On wheels. But the one that appeared first was that of passenger transportation, suggestively shortly after the half-sanction of several articles of the Omnibus Law had foundered due to the refusal of several legislators representing the provincial ruling party. Recent history indicates that when the 2002 devaluation occurred (with a 200% appreciation of the currency when it stabilized) the bus ticket began to be subsidized to maintain its value of $0.70 ($390 at last December values). . That price was always running behind inflation at the same time that new technical requirements, security and comfort were established, which were also covered by state funds. The object of this treatment focused on the electoral vein into which the metropolitan region of Buenos Aires had been transformed, since the constitutional reform of 1994.
When COVID paralyzed the economy, the Government launched another fund to pay for provincial transportation and not just the “interjurisdictional” one under which a subsidy to the Buenos Aires suburbs was hidden to mitigate what co-participation takes away from it on the other hand. These funds, which totaled more than $105,000 million during 2023, were the ones that were eliminated in one fell swoop and in which the calculators of the provincial bureaucracies already did the math on what they should spend to avoid producing a huge rate. or how to mitigate social discontent. Curiously, that was one of the flags of “Cordobesismo”, which described the previous Kirchnerist administration as only concerned about the clientelistic favor of its AMBA voters. Now, these same people have seen the cost of the trip triple and another increase is promised for April before implementing the promised policy of “subsidizing demand instead of supply.” That is, placing the “passenger” in a preferential location, something that in light of the multiple inconveniences just to be able to register the SUBE cards in the name of each user, began with a setback. Because in the modern view of “consumer experience,” Price updates can be tolerated, but accompanied by a minimum of management that, at least, expresses that the person paying is something more than a cog in a rusty mechanism that is being attempted to be revitalized.
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by Tristán Rodríguez Loredo
