The 5 keys to the first half of Javier Milei’s government

The change of management at the end of 2023 promised profound changes in an Argentina immersed in a very delicate political-economic situation. The arrival of Javier Milei to the Executive with an ambitious economic plan to eradicate inflation, generate fiscal balance and end the privileges of the political caste, generated a shock in society, which felt the weight of the chainsaw and the blender, which fell with greater virulence on those who have less. In addition, due to legislative and political activity, the city of Buenos Aires was the epicenter of social mobilizations, often ending in repression by the anti-picket protocol during the first six months of the year.1. Privilege the surplus at any costThe Executive passed the chainsaw through various items to achieve a positive balance in its accounts since January. Already in May it achieved the fifth green in a row in the public accounts. But to the detriment of what games? At first, it did so at the expense of pensions, social items and, in turn, thanks to the increase in the PAIS Tax. The 54% devaluation of the peso generated a liquefaction of pension items, which were already at a very low level. Pension benefits, with the change of formula by decree, only began to raise their heads in April, although very slowly. As an example, a minimum retirement in April, despite the recomposition, became $172,000 plus the $70,000 bonus (which did not vary since last year) while the total basket of older adults, lower than that of a typical family, in CABA stood at $524,034. In this way, a couple of retirees of the minimum does not complete the basket. Regarding social items, programs such as Empower Work (-67%), the National Early Childhood Plan (-79%), Social Economy (-99%) and the National Social Protection Plan (-94%) received strong adjustments in their execution, compared to the same period in 2023. Even the Food Card, one of the flagships of Sandra Pettovello’s management at the head of Human Capital as a direct transfer without intermediaries to the neediest families, received a real cut of 24%. A small separate paragraph for the lack of supply to canteens and the more than 5,000 tons of food crammed into warehouses of the portfolio commanded by Pettovello, which after a judicial setback they were forced to deliver. In turn, the libertarian administration received a greater number of items from the PAIS Tax, which had increased by 10 percentage points, rising from 7.5% to 17.5% for imports of goods from abroad. Now, with the accounts a little more comfortable, Caputo ratified that this tax could go down between August and September.2. Rise in unemployment, fall in wages and increase in povertyA few days ago it was known that unemployment rose to 7.7% (+0.8 percentage points) in the first quarter of 2023 and touched its highest level since the exit from the coronavirus pandemic, although the data are behind schedule to talk about the first half of the year. It was confirmed that there were 150,000 fewer employed and about 180,000 sought employment. As for wages, the outlook is not much more pleasant. However, in April, private wages on average beat inflation. In the first four months of the year, the wage index accumulated a 60.3% increase compared to December of the previous year, due to increases of 68.5% in the registered private sector, 54% in the public sector and 39.1% in the unregistered private sector. In that same period, accumulated inflation was 65%. However, since Milei’s inauguration and after the devaluation, assets have accumulated a real drop of 14%, according to the economist and researcher at the Institute of Studies and Training of the CTA – Autonomous, Luis Campos. These two components, the fall in wages and the increase in unemployment, also generated a rise in poverty, which, according to calculations by the Social Debt Observatory of the UCA, increased to 55.5% in the first quarter and affected 25 million Argentines. Bases and Fiscal Package LawThis week, six months after the presentation of the Bases and Starting Points bill, the approval of the law was achieved. This initiative began to be discussed in extraordinary sessions of Congress during the first months of the year and had profound economic and political modifications. After a month of deliberation, the law returned to square one in February. From there, two proposals were born, one political and economic and one fiscal, to give greater tools to the provinces, which had their transfers cut off and that due to the elimination of the fourth category of Profits during the previous administration had less collection. The Bases Law contains, among other initiatives, the declaration ofemergency in administrative, economic, financial and energy matters with the delegation of powers for one year, as well as the privatization of state enterprises, although with a very limited list unlike the one presented in the first instance. It also has the Incentive Regime for Large Investments (RIGI) with benefits for foreigners seeking to carry out large businesses within the agroforestry, infrastructure, mining, energy, tourism, oil, gas, steel and technology sectors, with a disbursement floor of USD 200 million with tax benefits. Likewise, Milei’s flagship law contains a labor chapter, which provides for the extinction of criminal action and the forgiveness of infractions, fines and sanctions for employers who regularize their unregistered workers. They may only have up to 5 years of contributions calculated on the amount of the minimum, vital and mobile wage. In turn, it extends the probationary period to 6 months, although it can be extended up to 8 months in companies with between 6 and 100 workers and up to 1 year in smaller companies. During that time, the worker can be terminated without cause and without compensation. The severance fund is also created and the figure of independent worker with up to 3 collaborators is created, without the need for them to have them in a relationship of dependency. Meanwhile, the fiscal package includes the restitution of the fourth category of Earnings for salaries above $1.8 million and the reduction of Personal Assets, but with the sanction of only one of the Chambers, which could motivate potential lawsuits. It also includes laundering with great benefits for those who declare assets: up to 100,000 dollars will not pay a penalty and for higher amounts progressive rates of 5 to 15% will be applied. Laundering is exclusive to Argentine residents and non-resident individuals who were Argentine tax residents. It also increases the monthly amounts and raises the scales of the monotax and maintains the “social” option of this regime, which was previously sought to be eliminated. 4. Mobilizations and anti-picket protocolThe most impressive mobilization of the administration was undoubtedly the university march, where given the flow of people, the anti-picket protocol was not applied. Thanks to the massive protest, the budget of the universities was updated, although the teachers are still demanding a salary update to make up for the loss caused by the devaluation. But during the days of discussion of the Bases law, the most violent mobilizations took place, the last one, on June 12 while the law was being discussed in the Senate, which left a balance of up to 33 detainees after repression and different gangs in Congress, of which five people are still imprisoned. The Ministry of Security, headed by Patricia Bullrich, came out to describe as “terrorism” the events that took place in the vicinity of the Upper House and federal prosecutor Carlos Stornelli presented his accusations asking that the aggravating circumstance of terrorist actions be considered, which doubles the penalties. Police repression was observed in each of the demonstrations against the Government’s initiatives. Tear gas, pepper spray and rubber bullets, which even hit press workers and deputies, the latter with parliamentary immunity. 5. Foreign policyIn terms of foreign policy, President Milei did not easily unite many voices in favor or close bilateral agreements with his international peers. However, with six months in the Executive, he became the president with the most trips: he completed 10.La intention, according to the spokesperson every time they are asked, is that they are trips to meet with businessmen from different countries with and without investments in Argentina, although externally Milei’s main agenda is the reception of economic awards from institutes in line with his ideology. As an example, on every occasion he traveled to Spain he did so to receive a decoration and did not meet with the authorities of that country, not even with the King, who came to the inauguration on December 10. He even accused Begoña Gómez, wife of President Pedro Sánchez, of corruption, which generated a diplomatic crisis that ended with the withdrawal of the Spanish ambassador to Argentina.What is coming for the second half of the yearWithout a doubt, the end of the first half of the year came on Friday evening, when the Minister of Economy, Luis Caputo, and the president of the Central Bank (BCRA), Santiago Bausili, reported the “second stage” of the economic program. This will be based on zero issuance and a new stage of monetary policy, which by transferring the passive passes (debt with private banks) from the Central Bank to the Treasury, could converge to rates positive real (those paid by banks for fixed terms and are just below that of the BCRA).

Original source in Spanish