From the release of prices in the economy, the inflationary leap occurred a sharp decrease in the purchasing capacity of a large part of the population. And this scenario is further aggravated by the loss of jobs in the private sector due to the recessionary context.
Although this diagnosis extends to the whole country, the struggle that the Government has with the Provinces for the distribution of the sharing funds would ensure that this decrease in purchasing power has an impact stronger in some provinces than in others.
According to a report by IERAL, this year the GDP would decrease by 3% and the total wage bill (net of inflation) would decrease by a greater percentage”. This is, in principle, “bad news for the business sector.” given that the hit to the wallet quickly translates into a drop in consumption.
In principle, The provinces that would be busiest are those that are most dependent on discretionary transfers (as a percentage of their current income) and whose public wage bill represents a high percentage of the total wage bill. Generally, “The northern provinces are part of that complicated group,” the specified ratio.
As IERAL analysts explain, “in previous adjustment periods, the public wage bill in the provinces has decreased less than formal private wages, largely due to the greater resources received through sharing. However, this year the situation is difficult to repeat. “because Sand would minimize discretionary transfers, as well as provincial tax collection, “There is a shortage of funding.”
Analyzing the February data, according to a survey by the Center for Argentine Political Economy (CEPA), there was “a decline in Resources of National Origin of 20.2% in real terms” and the Federal Fiscal Co-participation has recorded a decline of 16.2% year over year.
According to IERAL, in a period of adjustment, the most economically vulnerable provinces should be the ones that should receive the greatest financial assistance. The question is why this doesn’t happen in the country, asks the Mediterranean Foundation. “The answer is excess public spending in good times, which does not allow the accumulation of savings (anti-cyclical fund), to be used in “lean times”,” he said.
CEPA economist Hernán Lechter explains that “provincial income basically comes from two sources: own resources (mainly Gross Income, Real Estate, Vehicles and Stamps) and fiscal resources of national origin, mainly coming from tax-sharing transfers. As regards fiscal transfers of national origin, these represent a good part of provincial revenues: on average they reach 56.6% of federal fiscal co-participation (CFI) resources.
“If the rest of the transfers of national origin (RON) are incorporated, the figure rises to 70.3% of the total,” according to the Center. “Some provinces have a high level of dependence on fiscal resources of national origin, mainly for co-shareable resources, such as Formosa, La Rioja, Catamarca, Chaco, Jujuy, San Juan, while, at the other extreme, collection levels of local taxes the resources are significantly greater, as in the case of the City of Buenos Aires,” explained the analyst.
Source: Clarin
