Amid tensions with governors over their rejection of the withholding tax increase in the omnibus law, Javier Milei’s government took a new step to implement the adjustment plan agreed with the IMF and announced on Tuesday that will limit the ability of provinces to borrow from their banks to cover short-term expenses, such as the payment of salaries of public companies.
“The Central Bank informs us that this was the case Off the agenda is the extension of the authorization to the provinces to borrow from provincial banks, mechanics that they have used several times to meet urgent financial needs,” said presidential spokesman, Manuel Adorni, in a press conference this morning at Casa Rosada.
The BCRA rule dates back to October 2019 during the administration of Mauricio Macri, when “financial assistance for the payment of staff salaries” by non-public companies was excluded from the quota of credit available to provincial banks to finance public sector financial expenditure. This communication, renewed from year to year and expiring on January 31st, will no longer be extended.
“What it implies is that the provinces Shares in the respective provincial banks have exploded, So they make salaries pay with that credit from provincial banks, when it expires, they reduce the financing margin”, indicated official sources.
The measure has fallen like a bomb in the province who depend on help from their provincial banks to cover a sensitive item, such as salary payments, in the midst of rising inflation. “It makes us look down on the province and the municipalities,” they said in one province of Patagonia. “They are playing hardball,” they acknowledged in a government official.
In other provinces less under pressure, however, they believe that the move will not affect them because they have “a while” to move forward, without getting into debt with the provincial bank.
On the other hand, the banks grouped in the Association of Public and Private Banks (Abappra) have already requested the BCRA renewal of the financial margin to achieve this purpose. Within the entity are many of the provincial banks and important entities such as Banco Provincia and Banco Nación, which the executive is now trying to partially sell.
The Government has targeted the provinces in a context marked by the difficulty of obtaining governors’ support for the omnibus law, even within its own alliance. The leaders of the UCR and the PRO expressed their opinion yesterday discrepancies to the Minister of the Interior, Guillermo Francosduring a zoom, in which they expressed, among other things, their rejection of the increase in withholding taxes.
“We share the need for adjustment to balance the books, but this cannot be done by one level of government at the expense of another. We governors do not adjust transfers to municipalities nor do we just increase taxes that are not shared with local governments “In the country, however, the adjustment is based on internal transfers and aims to increase two taxes that are not shared, such as PAIS and withholdings,” said a governor who attended the meeting.
On Monday evening, the Executive sent a new bill that eliminates withholding taxes from regional economies, excludes YPF from the list of privatizable companies and creates a new pension mobility formula that would further reduce spending in that area, but maintaining the export duties on soybeans increased to 33% and industrial duties to 15%.
Inside the PRO, they note that Milei he reversed his desire for deregulation by introducing changes in fisheries, sugar and hydrocarbons who, although they respond to negotiations with governors and deputies, are seen as a “salad”. The Government will add a carrot this Tuesday with the scheme reinstating profit payments to around 800,000 workers.
“Aside from the fact that we don’t see why the basic bill shouldn’t end up becoming law, if this doesn’t happen we need to continue with the recovery of public finances, there will be no other way. The consolidation of public finances will pass through the analysis of all the items that the national government transfers to the provinces, in all the hypotheses that may occur”, warned Adorni.
Source: Clarin
