For Diego Giacomini, 63.5 of the adjustment will be paid by the people and not by the caste

The Economist Diego Giacomini published a report regarding the measures announced by the Minister of Economy, Luis “Toto” Caputowhere he assures that the “chainsaw plan” applied by the National Government will be paid mostly by the people and not by “the caste”, as announced in the campaign.

The work titled “Economic Weekly”, whose authors are Javier Milei’s former friend and Verónica Sosa, carried out an analysis regarding the export sector, regional economies, the increase in the official dollar and inflation in 2024. It also considers “inconsistencies” in the libertarian economic plan. All these items are analyzed based on the measures announced by Caputo last week.

“The package of measures from Javier Milei’s government has resolved to raise the dollar for exporters, which would be calculated 80% to the official dollar ($800) and 20% to the CCL dollar: let’s put a dollar at AR$ 840. So much for the positive However, the bureaucrats do not give in without a thread, Javier Milei has decided to increase the tax pressure, increasing withholdings for corn and wheat from 12% to 15% and also for meat and leather, which rise from 9%. to 15%. The worst result is the sunflower, whose retentions rise from 0% to 15%. In short, the entire agricultural sector begins to pay 15% withholdings.”says the work at the beginning of its editorial.

The report details that of that 5.2% total adjustment, 2.2% correspond to taxes. In addition, it clarifies that in proportion the adjustment paid by people would be 63.5%. During an interview with Jorge Fontevecchia by Fontevecchia modeGiacomini had considered: “When we look at the measures with the official numbers of the Ministry of Economy headed by Luis Caputo, one finds that 67% of the adjustment is being paid by the people, not the caste. Being generous, only 37% would have a chance of not being paid by the people. The adjustment presented by Caputo is an adjustment of 5.2% of GDP. One, looking at the number, the arithmetic, it is the intended adjustment in a biggest year in history.”

In addition, it is clarified in the work that the plan will leave a fiscal deficit of almost two points of the gross domestic product (GDP) by 2024. Both Milei and Caputo have insisted that the main problem of the Argentine economy lies in that item.

This, for the specialist, reflects that Caputo’s numbers are erroneous. There he explained that the deficit for the coming year was projected at -7.8% of GDP. If the numbers improve due to the harvest (besieged by a severe drought in 2023) to +0.7% of GDP and assuming a 5.2% adjustment, they add up to 5.9%, when the projected deficit was 7.8%. According to the economist, this difference of -1.9% would be paid with debt placement and/or issuance.

20231216 Report by Diego Giacomini

Among the 10 measures announced by Caputo this week, the non-renewal of labor contracts in the state that are less than a year old, the suspension of the National Government’s guidelines for one year, the reduction of 18 ministries to 9 and 106 undersecretaries stand out. to 54, the reduction of transfers to the provinces, the cancellation of public works tenders that have not started, the reduction of subsidies in transportation and energy, the official dollar to $800, the maintenance of the Empower Work program and the strengthening of social policies , the end of the SIRA import system and the doubling of the amounts of the Universal Child Allowance (AUH) and Alimentar Card.

What the report says about regional economies, the rise of the dollar and inflation

According to the work, regional economies are the new ones “tax victims” of the new government due to the increase in withholdings for all productive sectors. There he details the increase in sugar from 4.5% to 15%; citrus: from 0% to 15%; wine from 0% to 15%; peanuts from 0% to 15%; pears and apples from 0% to 15%; fishing from 0% to 15%; herb/tea from 0% to 15%; tobacco from 5% to 15%; rice from 3% to 15% and cotton from 5% to 15%.

“In short, for regional economies there is equality before the law of Javier Milei’s government; almost all of them start to pay almost infinitely more (remember that everything divided by 0 gives infinity),” says the text.

On the other hand, economists explain that The exchange rate “cannot be an anti-inflationary anchor” for the Government. “With the issuance that there was, is and will continue to be, we propose an inflation scenario of no explosion, but with strong inflationary acceleration,” they explain.

20231216 Economic report by Diego Giacomini and Verónica Sosa on the Government's measures
Report by Giacomini and Sosa

There he proposes four possible scenarios: a dollar at $800 fixed anchor and in 4 months +115% of accumulated inflation that would generate that in 3 months “we are the same as last week and in 4 months much worse.” And he adds to the report: “Ergo, they are going to have to move it and inflation is going to accelerate.”

In scenario 2 it stipulates a crawling peg Of 2% (NdR: daily micro devaluations of the official exchange rate controlled by the Central Bank of the Argentine Republic) monthly of the official dollar and ensures that “in the month of April 2024 we would be exactly the same as 1 week ago.”

In the third scenario, with the crawling peg of 10% monthly of the official dollar and without assuming additional inflationary acceleration, “in the month of April 2024 we would be only 4% better than 1 minute after Massa devalued 21% one shot “. Finally, he says that with the crawling peg of 10% monthly of the official dollar and without assuming additional inflationary acceleration “in the month of April 2024 we would be only 6% worse than after Massa devalued 21% one shot.”

The full report:

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