By Aldo Abram*
Inflation is falling faster than economists had anticipated. Projections were above 200 percent and it is estimated to be below 140 percent in 2024. Now, believing that this slowdown in inflation is a success is like trying to hide the sun. There are still several prices that have fallen behind that have yet to be recovered.
In Argentina, governments have issued money disproportionately to finance successive deficits caused by excess public spending. There was impoverishment that Argentines suffered since the previous mandate.
One reason for this is inflation, which kept increasing and meant a loss of purchasing power. All the uncertainty that existed at the end of the previous term caused more capital to flee, which led to a tremendous recession. In a country where less and less is being produced, expecting to increase income is like believing that more can be earned by selling less. In other words, in order for income to improve, the economy must first recover.
At this point, we are in a bind because economic and political directions are determined by Congress. And we see a Congress that is not sure about changing course, which prevents there being an incentive to spend or invest. The political leadership has to show us that they are willing for us to be a normal country. The economy has been recovering since April, but very little. There must be signs for more spending and consumption in the country.
Country risk and fiscal package
The exchange rate restriction must be eliminated because it is also a restrictive factor for growth. To do so, the approval of the fiscal package is needed, which, in the first debate, was very reduced. A thermometer of confidence in the change of direction is the Country Risk, that is, whether capital is leaving or betting on Argentina. It is true that the Country Risk is at very high levels, which shows that there are still many doubts.
As regards the Large Import Incentive Regime (RIGI), the ideal would have been to give the proposed conditions to all sectors that have already invested and are producing, but the reality is that there is no money. Giving that money to those who risk investing in a country with the legal and tax unpredictability that exists is to create a hedge. The bet is that they will come to invest more than 200 million dollars.
*Economist and executive director of Liberty and Progress.
