With elections out of the way, Argentina's Macri pursues new round of austerity
Days after an unexpectedly strong showing in mid-term congressional elections on October 22, Argentine President Mauricio Macri has announced a new round of utility and fare hikes, pension cuts, and limits to labor rights.
While still lacking a majority in either house, Macri's 'Let's Change' coalition gained 19 seats in Congress and 9 seats in the Senate - something the president interpreted as an endorsement of policies considered by critics to be 'trickle-down.'
"We've come to change Argentina forever," Macri declared on election night, predicting that his right-wing coalition will remain in power "for the next 20 years."
Rate and fare hikes
Cutbacks in public utility subsidies and the resulting jump in rates have been some of Macri's most controversial austerity tools.
Within a week of the election, administration sources confirmed that rate hikes for next February will include 20% for water, and 42% for gas and electricity - similar to those approved for last February.
While milder than the first round of rate hikes enacted by decree in April 2016 - including around 300% for water, 600% for electricity, and 1000% for gas - this new round threatens to slow the country's recovery from the 2016 recession.
Subsidy cutbacks for public transport, in turn, will double fares for city buses from 6 pesos (34 cents) to 12 pesos by next January. Commuter train tickets will rise from 4 pesos (23 cents) to 10 pesos, or 150%.
Public transport fares had already doubled in February 2016, two months after Macri took office.
Prices at the pump have likewise doubled since Macri took office, to 23 pesos a liter - nearly $5 a gallon.
The hike, the first since July, was authorized by Energy Minister Juan José Aranguren - a longtime executive and large shareholder in Shell Argentina, the country's second-largest gas retailer.
Twin deficits
Known in Argentina as tarifazos, these hikes have been part of a broader, IMF-endorsed austerity package designed to trim $4 billion annually from a record budget deficit of $25 billion last year (4.6% of GDP).
These savings, however, were lost to export tax cuts for the agrarian and mining sectors, which cost the treasury $4.2 billion last year.
Nor did exports recover, settling instead at $58 billion for the third year running. Lower import barriers and an overvalued peso, meanwhile, will leave a record $8 billion merchandise trade deficit this year.
Including trade in services and interest payments, Argentina's 2017 current account deficit may reach $25 billion - a shortfall financed with a growing foreign debt as are record budget deficits.
Pensioners and childhood benefits
Argentina's 8 million retirees, whose median pensions of 7,247 pesos ($410) are the region's highest, have their benefits increased by law twice a year above the rate of inflation.
Their benefits may erode in real terms if the Macri administration implements a planned cost-of-living adjustment of just 10% in 2018.
Annual inflation in Buenos Aires, as of September, was 26% and is projected to remain at 22% for next year.
The same applies to the Universal Childhood Entitlement (AUH), which benefits 4 million poor children and like most pensions is financed by the AFIP social security agency.
Raising pensions and childhood benefits by 10%, rather than 22%, represents a $6 billion annual cut. Some of those savings will be lost to a proposed payroll tax reduction, which will cost AFIP around $2.5 billion a year.
Pensioners are already reeling from Macri's decision in March to defund the REMEDIAR drug subsidy program, which paid for some 13 million prescriptions a month - some 70% of them free of charge since former President Néstor Kirchner extended REMEDIAR in 2005.
Proposed changes to labor laws made at an October 30 conference, in turn, seek to curtail unions, limit workplace injury compensation, and raise the retirement age.
Reaching for social security
These developments helped convince Kirchner's widow and successor, Cristina Fernández de Kirchner, to return to politics - winning a seat in the Senate despite a lackluster showing.
Former House Speaker Leopoldo Moreau, who was elected to Congress and is an ally of Mrs. Kirchner, denounced Macri for "cutting retiree benefits, raising the retirement age, hiking rates and fares, and curtailing labor rights."
"Administrations that take on excessive debt," Moreau noted, "always reach for social security."
At: https://translate.google.com/translate?hl=en&sl=auto&tl=en&u=http%3A%2F%2Fwww.ambito.com%2F901162-todos-los-aumentos-que-se-vienen-tras-las-elecciones
And: https://translate.google.com/translate?sl=auto&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=https%3A%2F%2Fwww.diarioregistrado.com%2Fpolitica%2Fmoreau---la-quita-a-los-jubilados-es-similar-a-la-que-intento-patricia-bullrich-con-la-alianza-_a59fb15c2469c062c4878264a&edit-text=
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Besides the slick manipulation of the Santiago Maldonado case (slipping his body in the river, just days before the election), the mid-terms also reflected the upturn since March - with GDP up 4.3% (only enough to reverse last year's recession), the auto and real estate sectors at near-records, and the peso stable at 17.50 since August.
But like past bubbles, it's been mostly financed with massive debt. One sixth of all new foreign debt taken on by developing countries has been Argentina's - $42 billion, net, in just 20 months. Only South Korea took on more.
Even some conservative supporters, notably the economist José Luis Espert, are sounding the alarm over the snowballing debt - a familiar pattern in Argentina since 1980, as you know.
I was surprised to hear Macri crow about staying in power for the 20 years, as he's always careful to stick to false modesty. He obviously talks that way in private all time, and it just slipped out.
Patricia Bullrich's spiked wine, perhaps?
Here you go, dear. *Hic* My secret recipe!
Go big, or go home!
