The state can be everything it is said to be, for or against, and also be a box full of resources available for purposes that suit governments that are not necessarily statist or interventionist. He knows these things like few others and has practiced them in abundance, let’s say the original Kirchnerism, from 2003 to 2015, and the more recent one of Cristina, Alberto Fernández and Sergio Massa, between the end of 2019 and the end of 2023.
And something, if not enough, of those experiences appears in the strategy that President Javier Milei adopts today, only with changed actors. Furthermore, there are some examples from 2023 taken from consultancy companies that followed the operations of that move on a daily basis.
Supported by an inflation that ran at 200% per year for a long time against the 70% expected in the National Budget, the Kirchnerism 23 model has reaped results additional tax revenue estimated at $1.8 trillion; i.e. 154% nominal or 9% real compared to 2022.
Put at the official exchange rate at the time, the game reported a profit equivalent to 5,000 million dollars no less than in an election year and, therefore, very useful for the policy of winning friends. Obviously the province of Buenos Aires was by far the most privileged in the distribution of what in the jargon of the tributaries is called “discretionary transfers”.
For starters, from that box it came $146.8 billion that Governor Axel Kicillof allocated for the Teacher Incentive Fundthat is, to the system that finances part of teachers’ salary increases and which, according to the letter of the law, should be supported by a tax on high-end cars and motorbikes.
Always under the aegis of the party system, The $170,000 million that Kicillof received to finance the deficit of the provincial pension system continues and protect the assets of an army of people earning the minimum. This share represented almost 70% of the total package that went to the provinces that transferred their packages to the Nation, compared to the 7.6% that went to Córdoba and the more modest 6.7% to Santa Fe.
The picture of the huge resources sent to La Plata is completed by the 223.6 billion dollars allocated to support the fiscal budget of Buenos Aires or, if you prefer, the electoral package and the transport fund.
With a lot of campaigning involved in the middle or pure campaigning at the end, the full picture of 2023 shows that of the 1.8 billion pesos that the Nation sent to the provinces 44.2% stayed in Buenos Aires; 4.4% in the Autonomous City and 4.4% in Santa Fe. All very K, though.
Strange or not so strange somersault these days, one of the first measures that Milei took upon taking office was to go down by decree and in one fell swoop. three key pieces in that package of so-called discretionary transfers, only now the provincial administrations have to pay the bill. He subsequently canceled the Teacher Incentive Fund, the transport subsidy system and the financing of pension funds.
Nothing by chance, the three represent the fulcrum of the positions defended by the governors. And they entail, at the same time, the risk that the fiscal adjustment underlying Milei’s decision will affect the inhabitants of the provinces and impose a fiscal readjustment of the high political cost to cover the hole.
The point is that the train moves forward without brakes. According to data from private sources, the nation’s total money transfers were recorded during the first quarter of 2024 fell by 86% compared to the still-swollen $135.7 billion that was added in January-March 2023. It would be more accurate to say, then, that the flow has been almost completely stopped.
The response of the provincials begins to manifest itself with the seal of blow after blow and with the spread of judicial threats that could result in the Supreme Court and, possibly, in sentences against the central government.
An almost obvious direct effect of the controversy is that the political sustainability of the fiscal adjustment itself and, in the act, the objectives of deregulation and liberalization of economic activities are eroded in some cases with well-known protagonists.
These are the fears that the main officials of the IMF have and raise every time they consider the possibility of the organization supporting the Milei operation with extra funds. It would seem, therefore, that it is not enough to overly cater to the IMF’s traditional policies, as promised by the Casa Rosada.
Made of power, of the worlds of power and of the federalism with which you grew up, the Nation also wins in the distribution of tax revenues generated in the country: it retains 57% of the total resources against the 43% that is distributed between the 23 provinces and the City Autonomous. In other words, more than half over one and 43% spread over 24.
The fact is that here we have an additional problem called recession, which is eating up tax revenues in quantity and without distinction of color, although it directly affects VAT, profits and other large consumption-related taxes.
Someone is thinking about strengthening the fiscal turnstile, that is, more of the same thing. Or will the turnaround of ideas be more complex than expected, influenced by market dependence?
Source: Clarin
