Juan Llach: "The recession is strong enough, the ignition spark of the engine does not work"

Juan José Llach, secretary of the economic programming under the government of Carlos Menem, has in the library of his home a frame with the ballot paper of the presidential formula Ernesto Sanz-Lucas Llach of the UCR, who competed in the PASO of 2015 with the candidatures of Presidents Mauricio Macri and Elisa Carrió. The second son of four children he had with his wife, Magdalena Estrugamou, Lucas was vice-president of the Central Bank during the management of the

Federico Sturzenegger.

Llach Sr. shares the general guidelines of the administration

Macri

and even though he believes it is the best option for the upcoming elections, he is now raising some criticism. In an interview with
THE NATION, the Minister of Education, under the administration of Fernando de la Rua, said the government should encourage investment and exports, which are the engine of the economy. So he would come out of a recession "which is pretty strong," he warns.

– How do you see the economy?

– Argentina is at a crossroads, it is not the first time. There have been several attempts in recent decades to put the country on an inclusive development path, but I think there is no awareness that we are exorbitant. Argentina is a very strange country. In the 21st century, the country recorded a growth of 0.81% of GDP per capita, according to an estimate of 2019. This puts us in 153rd place out of 179 countries. There is no country that has had 70 years of

l & # 39; inflation

chronic, with intervals of stabilization that lasted little. And, coupled with that, we are the only binary country in the world. This seems normal to us, but it is not the case. There is no financial system in pesos. The government has inherited a public expenditure, a fiscal pressure and a near-record budget deficit, and it must be financed in foreign currency. This generates a number of problems, as was the case during the crisis of last year.

– Do you think the government, when it badumed and designed its economic policy, took into account the fact that it is a binary country?

-I do not know, but I opted for gradualism. With Monday's newspaper, we are all wise. The mixed economy has the big problem that there is no written manual indicating how to get out of inflation. We chose this path, which could have lasted if international circumstances did not change. The main mistake was not to bleach the inheritance, because the idea was not to scare. I think it was a big mistake, because three years later, we can not say that what happens is the fault of what has been inherited. It should have been said at the beginning.

-There was some optimism when the government took office. Do you think it's still?

-When Macri went to Davos in January 2016, "an investment of $ 20,000 million was made, of which less than 10% was spent because there is a tax structure that, when investors started In Argentina, there are very bad taxes, which absorb about 60% or more of the taxpayer's income.This optimism, there was, as to the conviction that the government was on a good road, when they started doing the accounting, they did not give.

– But most economists in the private sector were optimistic.

– Yes totally. I think it was because there was a need to be. The circumstances are very changeable. When, at the end of 2017, the government won the elections by a surprising difference, the climate of optimism was general. Through agreements, a fiscal consensus has been reached with the provinces, which is extraordinarily important. Tax reform was also approved. Its calendar is now suspended because its resources are exhausted. The economy was growing. Investment in the fourth quarter of 2017 increased by 20% over the previous year. But that depended a lot on external funding.

– Why do you think that the financial deficit and the exchange rate delay have been underestimated?

-To avoid what is happening now. Inflation would have been much higher than in 2016, which was not low, because we would have had to accelerate rates, and the recession would have been deeper than it was in 2016. The idea of ​​gradualism was to go slowly so that the cost was spread over the years and did not decrease as much, as it happened in the last year or so. It was a possibility or the other.

– How do you see the elections to Roberto Lavagna?

– It seems to me that I could be the most difficult opponent of the change. We do not know yet when he will be a candidate. We are still thinking about electoral expectations, but inside we have to learn about these elections.

-In which way?

-By discussing what roads really are. Propose concrete things, because if we are going to do things that have been applied in the past, we have 14 stabilization plans that have failed. If we are going to use a booklet to go back to the previous decade or convertibility, all that has to look for the past is not the way to go.

-Why are the same mistakes made?

-A Argentina has the distribution dispute, which is almost at the roots of contemporary history. Whenever difficulties were encountered, shortcuts were sought, which ended with the budget part: increase in expenditure, increasing the deficit, and inflation generated, cause of bi-monetaryism. Once you make a mistake, it is very difficult to go out.

-He talked about inflation. The February data of the Indec may be as bad as those of January. Do you think this monetary system is the ideal way to lower it?

– There is the trap of bi-monetaryism: when the dollar moves, prices move much more than in other countries. The dollar movement did not immediately move to prices and there were also rate hikes. In contrast, the wholesale price index was positive in January, very low. [del 0,6%]. The wholesaler integrates much faster with the dollar because it is closely related to trade.

– How do you see monetary policy?

-It is not my area of ​​expertise. I think that there were not many alternatives. I do not know why a broad monetary band has been defined. I would have liked a narrower one. It's a bitter remedy. No one is in favor of such a restrictive monetary policy, nor does it benefit from such a policy, but these are the dramas of the binary economy.

– How long can you continue with this bitter medicine?

-The most bitter thing about medicine is the recession, which is pretty strong. There, it seems to me that the engine spark does not work well.

-What is the engine? The consumption?

No, what is called inclusive progress must come from exports and investments rather than consumption. One could, for example, try to encourage investments with a tax program in which the tax reform schedule is advanced to the investor. I put this example because it seems to me that the engine needs to be started and that something could be done. It is not a matter of waiting, because a recession, once installed in the economy, also has a training effect.

– Do you think the government has made mistakes due to lack of experience?

-May be. Obviously, governing a city as a country is not the same thing. There was a design error. The Minister of Economy was at the fourth level, because before there was the chief of staff and the vice-chiefs. Then the ministers. On top of that, there were many. There was a huge coordination problem.

-The country depends a lot on international humor. What can we expect if the context changes?

-We depend on two things: that the conflict between China and the United States will not be settled and that there will be no rise in inflation in the United States and that the Federal Reserve will change policy again and raise interest rates.

-Is there could be a new exchange if this happened?

-What could be, yes. But that will depend on expectations about the future and the election question.

-Elections will play a fundamental role …

-Yes, despite all his mistakes, this government is trying to follow a different path from the one that led us to decadence. With a lot of errors and back-and-forth, but the road is that one.

-How do you see the government for the elections?

-I think the opportunity is open. People are underestimated Government can also underestimate it. They have to say things more clearly, what are the options: if we do A, what can we do? This speech is understood. The same with the issue of notebooks. I heard colleagues say, "The cure can be worse than the disease". For me, the cure is much better than continuing with the disease of corruption. That it brings down investments is true. But you have to explain it to people. Brazil paid dearly for Lava Jato, with a 7% drop in GDP in two years.

"No country has experienced 70 years of chronic inflation, with stabilization intervals that have not lasted long, we are the only binary country in the world, it seems normal to us, but this is not the case. Is not "monetary policy is so restrictive, but the dramas of the binary economy are dramas" "What's called inclusive progress must remain on the side of exports and investments rather than of consumption "