Bajo_cero2 said:
I agree partially.
The State needs the dollars to pay for imports but we have a distorted economy because people treasure the dollars and there is a distorted lack of them in the central bank.
But people buy dollars and keep them under the matress or they used to buy real state, the best 2 ways to evade paying taxs.
Now, people has pesos and they must invest them otherwise they loose money because of inflation. The main problem of this country is that, intead of investing in opening a factory for producing goods that creates work for people, taxs for the State and income for the country when they are exported, people plays the bicicleta financiera, they gamble with money buying or selling dollars and that s how the economy got destroyed so many times.
The other big issue here is that people doesn t pay taxes and that s why they need to print money, if people starts paying taxes, the economy works better, this is basic.
What the President is doing is smart and she has big balls because if she is success, the cyclical economic crisis are over.
Of course, we don t have to agree, just to respect our different point of view.
Regars
I respectfully disagree with most of your points, except that evading taxes is a big problem in Argentina.
The 'State' does not purchase any imports for the private sector. Business owners who purchase products abroad (imports) must sell their pesos and buy dollars to purchase those items. International clients who want to purchase Argentine products must sell their dollars and purchase these products using Pesos. This is one part of how the exchange rate is determined. In the case of Argentina, the 'State' needs to manage the exchange rate to maintain an affordable debt load.
Paying taxes does not ensure that an economy works better. It gives the government money to provide services to the people. The government does not own businesses (except in the case of state run companies like the airline and other public services). The government makes the rules and private individuals decide whether or not to create businesses based on their own criteria.
I personally know many people who would love to invest in Argentina because opportunities do abound, but they will not do so because Argentina is far too risky.
Concrete reasons for this-
-Arbitrary rules. The rules of the game change every day based on the government's short term view of the world- i.e. Moreno deciding what is allowed to be imported. If I dont know what the tax rate will be next month, whether the importation laws will be valid next week, or even whether the government will 'allow' me to pull my earnings on my capital tomorrow, why in the world would I invest my money in that market?
-Corruption. Arbitrary rules lead to confusion, and provide ample opportunities for corrupt bureaucrats to create problems in order to collect bribes. Example: Go and try to get something as simple as a box of books out of customs.
-Ineffectual judicial system. The judicial system is highly influenced by the executive branch of government, contracts are often not worth the paper they are printed on.
-The Peronist version of the 'Bicicleta Financiera'. Find whatever area of the economy is doing best and arbitrarily raise taxes on that part of the economy. This is the way that Peronists have financed their heavy spending increases for years, and always leads to a decline in the most productive part of the economy. i.e. Cattle, Soy, or any other business that is making 'too much money' that benefits that evil 'oligarchy'.
-Now you have to add to all of this the fact that you now need to 'Lay low' in order to function in the country. Any sort of statement contrary to the official line is seen as dissention, and the government targets you in public. There have been no facts or concrete proof whether this real estate agent had or had not paid his taxes. Just the mere mention that he had not presented his declarations is enough for the judge and jury (all of us) to condemn him as a tax evader. I just hope that you or I don't find ourselves in a similar situation one day.
People hiding their dollars in their mattresses or pushing their money into real estate is simply a rational response to these systemic failures. I agree with you that this is a negative thing for the economy, but it's simply the reasonable reaction to structural problems in Argentina brought about by poor government policies. These types of policies are nothing new, and always lead to a decline in prosperity and a black market, or in Argentina's case a 'Blue' market.
I consider Argentina my home, and most of my best friends are in Argentina. But in my opinion the country is headed for a serious decline precisely because of the President's 'big balls'. Time will only tell who is right on this point, but the current global situation is VERY different from 2001-2, when Argentina was able to recover through devaluation and record demand for commodities. If she fails in her project, there is no safety net this time around.
All the best,
Anonymous (for my own safety)
