The numbers are unappealable. Argentina ended the year 2023 with a fiscal deficit of 6% of GDP, which includes the operational (the “primary deficit”) and the financial (payment of debt services. But if we add the quasi-fiscal (that generated by the interests of the Central Bank) it will have exceeded 14% of the GDP if we consider that only the monetary issue to finance it during last year was 12% of the GDP.. Unsustainable figures, alluding to the workhorse of the now resurfaced Martin Guzman. But to correct it, with an economy with inflation running at more than 200% annually, with a flight from the peso, with negative net reserves, with a continuous threat of cutting off the supply of imported inputs due to non-payment of private debt and with rates of poverty near its historical peak of 2002, The ways to correct it are few and unpleasant: raise taxes, increase the tax base or reduce expenses. The rest is impossible today due to the risk of an inflationary collapse.
Measures. Already the minister Luis Caputo He acknowledged it in front of a group of businessmen: “we are taking measures that are unpleasant and that go against our own convictions.” In light of the endless discussion in Congress over the fine print of the “omnibus law” it seems that the electoral slogan of the adjustment paid by the “caste” was very far away. Unless the provincial governments are understood in that category, with zero presence of the libertarian ranks throughout the territory that until now showed a polyphony of distance from the Casa Rosada.
And there comes the other unappealable fact: to implement the modifications in the public accounts and be able to close the fiscal gap, they must go through the vote scrutiny of Congress and that is where the provincial, partisan and permeable castes Lobbies of all kinds have the upper hand. The pure ruling party only has 15% of the seats in deputies and 10% of those in the Senate. With these figures, it is proposed to achieve a task as improbable as it is ambitious: that the adjustment necessary to quickly balance the Treasury accounts falls on the backs (and pockets) of the provincial governments..
It should be remembered that within the farrago of articles of the DNU no fiscal content was contemplated by constitutional mandate. So from moment zero it was subject to parliamentary discussion, with the typical twists and turns of this type of negotiation. And in this way, many of the initial contents of the bill were crossed out or duly cut to be dealt with later so as not to hinder the difficult approval of the “Bases” law.
One of those crossed out was what was called the “political reform” which, among other things, changed the representation of deputies from each province, with a strong gain for the postponed one. Province of Buenos Aires (+27 seats), Córdoba (+3) at the expense of those overrepresented or with a stagnant population (the Patagonian ones, except Neuquén in the first case and CABA in the second). An earthquake in many groups and regions, with major importance in the configuration of taxes and subsidies.
The numbers. The postponement of many measures, Like the request by the governors themselves for the reimposition of the Income tax (with the due semantic correction renaming it “Income”), was left for later, when the forced correction of a tax that had been distorted by inflation and the amendments that created pockets of exceptions is discussed again. Also the resistance to the reestablishment of withholdings in the provinces closest to the Government, with economies based on the agricultural sector and which constitute their electoral base.
In the latest monthly report of the IARAFthe funds that were automatically shared during January were a 11.1% lower in real and year-on-year terms. But it is also a record drop in almost a decade and, in addition, it shows uneven behavior depending on the jurisdictions. For example, the Buenos Aires province It was the one that suffered the most with a drop of 13.5% in contrast to those of CABA (-8.1%). Its president, the economist Nadin Argañarazpoints out that the low performance of this flow is due to several reasons, but fundamentally to the virtual disappearance of the Income tax for individuals (or “4th category”) but it had a real year-on-year recovery of 15% of funds from VAT, after the abrupt decline in December.
At the level of amount per inhabitant, the drop is more pronounced in those smaller jurisdictions and in which the national contribution corresponds to a larger portion of total tax revenue. Tierra del Fuego ($-16,572), Catamarca ($-15,412) and Formosa (($-15,112) are on the podium of the most affected. And Catamarca is just behind them (-13,654), which these days became the icon of fiscal disarray and monetary rebellion.
Witness case. The governor Ricardo Quintela He raised the flag of federal resistance when he resorted to an old institutional device of the provinces when they are drowning in their accounts: the issuance of a debt cancellation bond with monetary circulation that confronted him with the national authorities. “The new financial tool will soon be in use that will allow us to organize ourselves better in a difficult context,” the governor communicated, while he finishes defining what will happen to the provincial finances and the details of his bond, among which is the key information: what can be paid with this new quasi-currency. The Minister of the Interior was emphatic: “There is a fiscal pact that prevents the possibility of issuing quasi-currencies and that will be communicated to the governor of La Rioja”. But beyond the dialectical dalliance, the Rioja case was emblematic because it is the province that accentuated its fiscal dependence on the Treasury in recent months. In a study of IDESA, it is pointed out thatThe province received $94,000 per inhabitant in transfers from the Treasury during 2023, more than double the average of the rest ($42,000) but in the count of public employees, La Rioja had 114 per thousand inhabitants, against 50 for the average of the other jurisdictions. A case that only shows the contradictions of a fiscal system that abandoned responsibility for the “construction” of administrations more vulnerable to recession and even climatic events.
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