On December 10, 2015, President Mauricio Macri, when he began his term, faced one of the most difficult battles Argentina has ever had: a social, cultural, political and economic crisis.
The president had the complex mission of reducing the fiscal deficit, without being able to raise taxes in a non-Peronist government. What did this mean? Reducing public spending meant reducing public employment, updating energy and transport rates, and eliminating certain social subsidies. All measures that would have an impact on society's pockets and would have negative effects on the president's image, which would not be favorable in a country where there are many historical unions and opportunistic opposition.
The problem of the fiscal deficit could have been solved more quickly if taxes had been raised, but the famous “bomb” that was inherited complicated matters. What was this “bomb”? The inheritance consisted of having a record tax burden, one of the highest in the world and insufficient to cover public spending. This means that the Argentina does not suffer from a collection problem, it suffers from a spending problem.
A high tax burden causes less investment and growth, which is why President Macri, at every opportunity, acknowledges that taxes must be lowered; but the problem he faces is how to solve or lower the high public spending we have, knowing that taxes must also be lowered?
The government is aware that it has to reduce public spending, but it knows that it is not enough to reduce it only by raising taxes; it has to reduce it further in order to reduce the high tax burden that exists in order to grow in terms of economic competitiveness.
This task of government is difficult to carry out in a private company or in any other country, and without a doubt, it is much more complicated to do so in Argentina.
Before Macri took office, Argentine society, motivated by the media and the opportunism of the opposition, accepted that the future government would prioritize technicality over politics.
Can technicality be aligned with politics?
We must highlight that “technicality” refers to technical aspects, associated with applied knowledge and the scientific method. Based on the etymological analysis of the term, technicality comes from the Latin “technician” and from the Greek “technikós” which means technique or art, and the suffix “ism” which means system or doctrine. Consequently, “technicisms” is a word that refers to a doctrine of art where Art requires a particular technique for its perfect execution and results.
At the beginning of his presidency, Engineer Mauricio Macri showed signs of the country's direction towards the goal of becoming a stable and continuously growing nation. To do so, it was necessary to prioritize technicality over politics.
A look at the following first decisions shows this:
- He fulfilled his obligations, honoring debtsand giving signals to the world to obtain credibility in the external market.
- Freed the dollar which was tied to a currency control and politically restricted.
- He cancelled the withholdings in exports, a fundamental obstacle to the growth of foreign sales of any nation.
- He sought the opening of foreign trade, eliminating unnecessary restrictions on imports of inputs and goods.
The untimely fear of governability
What seemed to be on the “technical” track for the nation's growth was met with an invasive movement supported by criticism from the opposition and some media outlets, which sought to generate fear in society about this type of mechanism and its consequences of shock adjustment without social sensitivity.
Social media aired phrases like, “we are all governed by CEOs”; “they manage us through an Excel spreadsheet”; “they don’t know about politics,” etc. In Balcarce itself, they began to pay attention to the noise generated and without forgetting the ghost that haunts all Argentines; that precedent, that “the last non-Peronist government to complete its term was Marcelo Torcuato de Alvear – 1922 to 1928 -.”
In light of this, it seems that the “red circle” of Cambiemos has distanced itself from the technicality that Macri was determined to apply; the “small table” caused the abandonment of the chosen path, imposing the decision of to move away from that technicality and turn to politics as a priority tool.
While politics is important, technicality is necessary in order to achieve the goals of developing a country that has not grown for decades due to the prioritization of politics over technique. (Politics is the short-term game where defense is sought before attack and its objective is to prevent or cover up some act that could lead to a conflict of governability.) Politics is important, but technicality is necessary.
Populism is created without technical jargon and a lot of politics. The new method used by the government to dispel this spectre and maintain its governability consisted of financing in response to media claims.
One of the points where politics was chosen over technicality was the following:
- Stimulate consumption to achieve hypothetical economic growth in order to collect more taxes in order to end the deficit.
- Reduce interest rates, allowing a “little” more inflation for more consumption and avoiding the cost of “adjustment”.
- Introduce the tax on financial income, so demanded by the media. This excess of politics made it impossible to reduce public spending.
Excessive politics also leads him to not reduce this necessary spending.
Effects of “gradualism” and “technical shock”
Unfortunately, the government's plan to implement a project aligned with technicality over politics was affected by fears that reached the heart of the president's "inner circle" and the government began to listen to the echoes of a policy rather than applying technicality, giving rise to the opening of "gradualism" and closing the doors to the necessary "technical shock."
It seems to be unknown that “gradualism” leads to society receiving several “blows” over a long period of time. Generating “lack of protection”; “wear and tear”; “legal insecurity” and “reducing confidence in the markets”. Although “the technical shock” could also be a blow felt by society, it would be a one-time and not chronic. Between both possibilities, it can be considered that Argentines, when voting for this government, knew that change would not be easy and in that sense, voters were willing to take the “technical shock” to achieve the long-sought rebirth.
The gradualism implemented implies a delay in solving vices that have been in place since before and prevent real sustained growth. In any scheme, gradual or in shock, the population that was accustomed to spending more than its income will protest against all the actions necessary for a change. On the contrary, Those who saw the need for it will agree to bear the painful transition from an “Argentina that spends irresponsibly” to a “responsible and moderate Argentina”, in short, from a “populist Argentina” to a “Prosperous Argentina".
Finally, it is highlighted that, in both adjustment modalities, there will be a social conflict, the difference will be that if a conflict occurs with the shock, the problem would be resolved. Meanwhile, in gradualism, there would be issues to resolve such as fiscal deficit and record tax burden.
The most technical government that took office in the last 50 years did not know how to ignore the echoes of politics and paradoxically, the government of CEOs who embrace technicality, moved away from it to go into politics without realizing that politics itself, by abandoning technicality, could play a bad game for them..
By: Felipe Coronel de la Torre
Aduana News is the first Argentine customs newspaper to launch its digital version. With 20 years of experience, its publications and initiatives aim to provide the most relevant knowledge on customs issues in order to contribute to safe trade in the region.
