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Heterodox economists grouped in the Political Economy Collective for Argentina (EPPA) warned by "serious inconsistencies" of the economic plan of Mauricio Macri and warned of the consequences "external fragility" in which Argentina was left after the application of a battery of measures taken from the recipe of Neoliberal administration. "The homeland is in danger and, from us, we can only express our concern about the sustainability of the economy" they argued.
The second document published by the EPPA entitled "The Unbearable Economic Model Continues to Play Fondo" . In the text, dozens of experts who are mostly aligned with Kirchnerism, many of whom were in office, have made a diagnosis of the main decisions taken by the Cambiemos government since 2015.
According to academics, with the arrival of Macri An economic model of "conservative cut" which entered a "vicious circle of adjustment and shrinkage" State capacity has been consolidated. "These policies led to deepen Argentina's structural problems and to make this model an unsustainable path to socio-economic development, fueling capital flight and financial speculation that, by the 39, external debt, they intend to support in the As the recent agreement signed with the IMF " the main criticisms of the EPPA have focused on the progress of economic and financial deregulation of Argentina:
· dissolution of the system of administration of the foreign exchange market, which left the market for the purchase and sale of foreign exchange, allowing free entry and the exit of financial capital, and at the same time resulted in a devaluation of 40%;
· Relaxation of quantitative controls, such as DJAI and non-automatic licensing (LNA);
· The repeal of regulations and the flexibilization of agreements such as what happened with the oil sector and the Caring Prices program;
· The fixation of a "ceiling" at the joint, which has resulted in a loss of purchasing power and a fall in the domestic market;
· The elimination or reduction of withholding taxes on exports, which resulted in a significant loss of tax resources. "It is estimated that during the triennium 2016-2018, some $ 7,500 million were prevented from entering the public coffers," they pointed out.
They also questioned money laundering for more than 130 billion dollars. the assets of the great escapees, with no obligation to repatriate their capital "and the elimination of progressive taxes, as heritage and high-end cars, which only benefited the high-income sectors.
Lebac. The heterodoxes considered that the "aggressive policy" of liquidity captured by the issuing of letters (Lebac) that the Central Bank has carried out only caused a [traduction] "snowball" ] where in each maturity, the injection of pesos became more important, forcing themselves to maintain a high rate to avoid a run of these pesos on the dollar.
"The stock of Lebacs on the monetary base has grown exponentially, representing 200% and tripling the levels inherited from the previous government, in this situation, the state has significantly reduced its power of control of Key monetary and exchange rate variables to manage the economy, such as interest rate and exchange rate nominality, which together with the debt problem, jeopardizes the country's economic independence they said.
But at the same time, they point out that the "ball" is not developing inflation. "By the end of 2017, it was already perceived that the process of disinflation of which the executive spoke was truncated and that it was a mirage, the policy of high rates did not seem not effective and the recent exchanges of 2018, added to the new rates, gave rise for this year to a renewed inflationary impulse " they recalled.
In this context, they denounced a failure of Federico Sturzenegger in the Central. "The monetary policy of sterilization of the pesos through Lebacs has not only failed in its anti-inflationary goals, but accompanied by increasing indebtedness" they observed in the document to which we accessed atmbito.com.
After giving their diagnosis, the EPPA declared itself concerned about the fragility of the Argentine foreign sector, with three specific calls to attention on the factors that increase the risk:
Losses of reserves. "Secondary creation of a mass of assets denominated in dollars, such as the fixed terms of the banking system Each maturity of Lebacs represents a potential move to the dollar, resulting in a depreciation of the peso or a formidable Loss of reserves.Investors with higher rates in pesos are a double-edged sword because the threat is maintained and growing, as long as a real sustainable currency income over time does not. is not generated. "
A strong exchange rate. "Rising interest rates in the United States and the growing protectionist trend have led to a stronger dollar, which has led to the disarmament of peso financial positions to be invested in higher quality assets (nominated in hard currency)."
The dollarization of the system. "Since January 2016, deposits in Argentine dollars have steadily increased, currently accounting for 46% of the international reserves of the Central Bank, and if there is a rush on deposits, the Argentine monetary institution must support them, losing the reserves that are necessary, in this case, the exchange rate ceases to be the adjustment variable, because it does not prevent the withdrawal of these deposits. banking system was, among other things, the cause of the greatest economic crisis Argentina of all time. "
Another paragraph was devoted to the agreement with the IMF, which they believe, beyond A "strong adjustment of public works" with "more recession and poverty and fewer jobs and infrastructure", will imply a lack of sovereignty in decision-making . "They lend money in exchange for sovereignty, which will bind the government that will be conditioned to deepen the same adjustment that caused the currency crisis" they said.
According to this group of economists, the loan of 50,000 million US dollars is only a temporary palliative. "A white card of international power factors (IMF and central countries) to ease the tensions on the tired external accounts of our economy, the mistrust of the markets on the management of public finances, which materialized in the races of 39, exchange of the last two months ", they assured.
Finally, they pointed out that "another way is possible" and they slipped four concrete measures to avoid that "The current situation constitutes a stalemate":
Ø Stimulate the development of the domestic industry, in order to generate more added value and reduce the needs of external debt to fill the empty boxes of our productive matrix.
Ø To recover the instruments of control and regulation of capital flows, the foreign exchange market and the establishment of an institutional framework guaranteeing the intervention of the State in foreign trade .
Ø Gradually shift industrial development towards exports, stimulating the sale of higher value-added goods to overcome the preponderance of the primary sector as the main source of foreign exchange.
Ø Urgently recompose salaries and pensions, in order to recover the purchasing power of majorities, and thus recover the virtuous growth circuit lost at the end of 2015. This trajectory is even more effective in terms of social security. budget balance targeted by the government.
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