At the beginning of the second half of his term and after overcoming a difficult week in the financial markets, The national government rushed a series of announcements before the opening of operations this Monday aiming to seduce large investors who had fled Argentine assets and to highlight results in terms of salaries to respond to those who question the internal situation.
In addition, it hopes to reinforce the favorable climate in the coming days with the confirmation of the meeting of the Board of Directors of the International Monetary Fund (IMF) for approval of the 5% disbursement and the announcement of Indec of an inflation rate of less than 5% in May.
In the same sense, he sought to give a first blow to the possibility that the Senate rejects the Bases Law.
In a clear signal to the financial market that the national government will not devalue the peso, the Minister of Economy Luis Caputo announced that he will reduce the Country Tax from 17.5% to 7.5% if the Bases Law is approved.
The measure has the double intention of ratifying that will seek to gain competitiveness through tax reductions and not from a modification in the exchange rate.
The head of the Treasury Palace made the decision to give it shortly before a new week of operations begins, after the previous one showed one of the lowest export settlement levels in recent months to an average of US$ 100 million per day.
I knowExporters and producers maintain the fight with the Government over the value of the dollar and in this way Caputo reaffirmed the official intention to support the price of the currency.
The impact of a possible reduction in the COUNTRY tax
The Reducing this tax will mean lower costs for companies for imported inputswhich can improve profitability margins without affecting the exchange rate, but at the same time it will make finished goods cheaper, which will compete strongly with local production.
However, it is worth clarifying that the possibility that The Government can supply 10 points of monthly collection of the PAIS tax It is more associated with the approval of the fiscal package than with the Base Law, given that there are the tools that would allow it to compensate for the drop in income, such as the increase in Income Tax for fourth category employees.
It should also be noted that Caputo was careful to give details, given that the range of sectors in which the tax applies is so wide that its implementation is decisive for the final result.
After the appearance of Caputo who spoke for macroeconomics, in the early hours of Monday the Office of the President issued a statement in which it highlighted data from the Ministry of Labor in relation to an improvement in the purchasing power of wages in the month of April.
Salaries versus inflation, according to the Milei Government
At the close of last week, the Secretariat published the Taxable Remuneration of Stable Workers (RIPTE) that showed an increase in salaries in April of 16.1% compared to March.
The Government took that percentage increase and He compared it with the inflation of the period, which was 8.8% to emphasize that salaries began to rise more than inflation and therefore improved their purchasing power.
“Argentines are beginning to experience a recovery in the purchasing power of their incomeos, thanks to the slowdown in monthly inflation inherited from the previous government,” stated the official report.
In the same statement, the Executive Branch stressed that this was possible due to the application of a “serious economic plan,” which aims to respond directly to those who claim that the national government “does not have an economic plan.”
Different analysts stated that the RIPTE is not the best indicator to measure salary evolution.l because its conformation has limitations.
How markets responded to government announcements
To this communication strategy, The markets responded unevenly. The blue dollar jumped $20 and closed at $1,285, but financial options fell. The MEP ended at $1,271 and the Cash with Settlement at $1,301. Meanwhile, the BCRA sold US$ 9 million, without being able to resume the path of acquisitions.
The public debt bonds that had been seriously punished last week rebounded between 2 and 5% which brought the Country Risk down to 1,499 points, after having touched 1,600 points. In turn, the Merval index of the Buenos Aires Stock Exchange rose 2.7% and Argentine papers on Wall Street also operated with major increases.
The national government hopes to consolidate a better atmosphere with the confirmation of the meeting of the IMF Board of Directors to approve the eighth review and the transfer of US$ 800 million. In response to a query from this medium, the organization refused to officially ratify that the conclave will be on Thursday the 13th as reported by the media.
The same day, Indec will announce that inflation in May was less than 5% and there will be approximate data for the first week of June that could consolidate a trend in the same range, another of the positive aspects of the program that the Government was careful to highlight.
