This was stated without hesitation by the Argentine Budget Association (ASAP), a body founded 46 years ago and made up of specialists qualified in the analysis of public accounts. He said that compared to the same period in 2023, the decline in capital expenditures in the first quarter of 2024 “presents levels of almost total halt in public investments”.
It’s about the service of 83.4% real, inflation discounting, which the Ministry of Economy has added to the state funds intended especially for this infrastructure works in land, rail and air transport, as well as in housing and basic social services. The “almost”, in case clarification was needed, is the difference between 83.4% and 100% completed.
Translated into silver, the measurement represented a fiscal “savings” of 124.7 billion dollars, That is, just over a quarter of the 597 billion dollar cut to pensions and pensions which, in the same quarter, implied the decision to apply the pension mobility inherited from Kirchnerism. The issue this time is not about fiscal tightening, which abounds, but about How far does the squeeze go?
Hitting public investment and hitting it from the start is here a classic of adjustments of all times and all governments, an obvious move considering that the political return of the works is collected when they are completed while the cost can be short-term, if it materializes, for example, in a salary cut. The way out would have been for someone to imagine a slightly more elaborate variant.
This, however, is known Pensioners are not capable of organizing large protests or noisy mobilisations. and if they talk on election days, as they talk with their votes, the next one is a long year away: the legislative elections of December 2025.
Just to add a misfortune of this period to the general picture, we have that between November 2023 and March 2024, in just four months, the purchasing power of the minimum pension collapsed by 21.5%. Or 16.1% with the extra bonuses built in.
The point is that public investments do not represent a harmless alternative but, always, a bet on the growth and productivity of the economy, on generally well-paid employment, on progress and quality of life and, if you want, on social balance. . Subsequently, it can serve to reduce the competitiveness gap with countries investing in activities that are neglected here, which age and are left behind.
Anyone can see without too much effort the enormous and growing deterioration of the infrastructure in Argentina and, moreover, the quality of the services provided by the State.
The role that libertarians assign to the State and not just to the economic State is clear in their decisions, even if it is understood that someone will do what the State does not do and will obviously make them pay for it. The officials who administer the state operate in the middle.
A series appearing on the spreadsheets of the Ministry of Economy reveals that we are finally faced with a precedent process.
Calculated as a percentage of GDP, Argentina’s public investment was 1.3% in 2023; 1.4% in 2022, 1.1% in 2020 due to the pandemic and 2% in 2019. Only in one of the last five years has the country exceeded the very modest 2% of GDP: in 2021, when under pressure, they were paid supplier arrears.
Nearby, in the neighborhood, we have notable contrasts and a different way of interpreting economic processes. Data from Latin America show that, since 2000, average public investment in the region has fluctuated around 2.6%, 2.9 and 3.9% of GDP, i.e. generally above 2%.
Much further away, in the world of South East Asian countries, the average is 7%. Along the same lines, according to data released by Monetary Fund analysts, between 2013 and 2015 public investments exceeded 7% of GDP in 30% of developed countries. And others consider 4-5% a reasonable level.
It is clear that this is not the path chosen by the Government. Javier Milei and his Minister of Economy, Luis Caputo, They have all the makings of an aggressive, accelerated, sometimes extreme and decidedly market-friendly fiscal adjustment. It is therefore intended to be a demonstration of firmness and commitment towards your ideas.
Lacking content clearly associated with the real economy, the model fits well with a description widely held in the financial world: “Argentina is a short-term business,” he says. You could even say that it is a country where there is never a shortage of bicycles or where bicycles and expert cyclists often abound.
All very attractive for those looking for opportunities, but risky when the activities on which one has bet fail. And here we have, among many others, two large and important ones who are going through a really difficult time.
One is nothing less than manufacturing industry, which accumulates nine consecutive months in the ravine and three of which with really raised reds: 12.9% in December 2023 and 12.2% and 9.9% in January and February 24.
In the same bulletin, other negative records appear as strong or stronger than those, such as the 48.3% drop in the production of agricultural machinery; 39.7% went to the steel sector and 17.7% to the automotive business.
The next menu is also not out of place: between October 2013 and October 2023, 68,573 registered jobs were lost in the sector. Today the workforce amounts to 1.2 billion jobs.
Now, the turn of construction. Between February 23 and 24, activity saw a 24.6% decline following a 21.8% decline in January and another 12.2% decline in December. Quantity numbers also appear on the material shelves and all in bright red, such as 64.9% asphalt, 45.9% iron and steel or 34.8% concrete.
And so that the drowsiness does not ease, we still have a couple of figures, none of which are as encouraging as they should be. One reports that formal employment in the sector reached 396,287 workers in December 2023 and was therefore below the 400,000 barrier after 17 consecutive months of being above that mark.
The figure below reveals that manufacturing and construction together account for 20% of Gross Domestic Product. And if we add wholesale and retail trade, which started 2024 with a decline of 8.2% and represents 13.3% of GDP, we have 33% of the economy in recession.
All specialist analyzes aim to identify when the economy will start to recover. There is an alternative: knowing when it will stop falling.
Source: Clarin
