Lavagna

[BienTeVeo]

Roberto Lavagna (who was Minister of Economy under Nestor Kirchner) has published a very tough assessment of the situation in today's Clarin. Here's the link: http://www.clarin.com/opinion/frente-economia-falsa-escuadra_0_713928683.html

I'm sure many here might not agree with all of his politics, but Lavagna's a serious person. Had he been elected when he ran for president in 2007 (getting just under 17%), I think Argentina would be a much different place - closer to a normal country, farther from this circus. He's professional, low-key, honest, and usually very circumspect.

At the end of the piece he mentions the notorious "Rodrigazo" (a very messy and sudden devaluation which led directly to the ouster of Isabel Peron). Seeing someone of his credibility and stature evoking this nasty chapter in Argentine history certainly got my attention.

 

[jimdepalermo]

I saw the article this morning. Disturbing!

Lavagna is usually fairly low-key, reliable, undramatic. When I was watching Argentina from a distance in the early Kirchner years, he seemed to be the architect of the recovery. Rumor had it that Nestor canned him for not playing well with the other ministers - especially De Vido, whom he supposedly accused of fostering cartels of cronies to bid on government contracts when he headed Public Works.

It would be useful to the forum if someone would post a good English translation of the column.

For anyone who's interested in Rodrigazo, here's a Wiki article in English: http://en.wikipedia.org/wiki/Rodrigazo.

 

[ElQueso]

Thanks for the link, I liked what he had to say.

Maybe Lavagna can be the rallying point for the cacerolazos.

I found even more interesting the comments under the article. A lot of people very against Cristina and a lot saying Lavagna is credible and stands a chance of changing things.

That would remain to be seen, if he could do it, if he wants to try. But I wonder if maybe he is purposefully positioning himself to be in the spotlight if things collapse in some fashion and take advantage of a situation where Cristina resigns or is thrown out somehow.

 

[el_expatriado]

Lavagna seems like a sensible guy. In my opinion he was responsable for the success and growth of the economy during the first Kirchner administration. Ever since he left they haven't had a single Economy Minister who has been anywhere near as serious. Remember Felisa Miceli and the bag of money in the bathroom? They've been flying by the seat of their pants in economic matters since he left.

 

[BienTeVeo]

I started this tread so I guess it falls to me to translate the article. Gave it try, then gave up in despair. So here's a short synopsis: everything is going to hell in a handbasket. Longer synopsis: everything about this economy is completely out of whack (en falsa escuadra): taxes, subsidies, prices (real-estate, energy, utilities, transportation), state control of imports and exports, public spending, monetary policy, poverty levels, distribution of income, inflation, etc. Investment is not coming in. Decent jobs are not being created, esp. for the young. The country is becoming less competitive. Income distribution is more and more lopsided. There are fewer and fewer incentives for production. Public services are deteriorating. Savings rates are down. Credit is non-existent. Tax evasion is rampant. The government's responses are short-term band-aids, piecemeal, volatile, discriminatory, and authoritarian. Their public pronouncements are devoid of all content. We might be headed for another "rodrigazo", something devoutly to be avoided. Finally, here's a very, very loose translation of the last paragraph:

"An economy is like clock-work. It can't be fixed by hitting it with a hammer, by throwing its pieces in the air, or looking at them as isolated elements. It must be repaired with extreme care. Each element is necessary for the functioning of the whole, and must fit with the others in order for the mechanism to work, so that the hands don't move in reverse, against time and history, the future."

 

[Crema Americana]

If anyone cares to read it in (somewhat) English, I was practicing my translation skills. I won't quit my day job.




We're Facing an Out of Square Economy

All prices and monetary variables are out of balance. The combination of unrecognized inflation and "patch" politics has created this situation.

The real value of the official dollar doesn't correspond to the productivity of the country nor to the conditions of supply and demand, nor to what the people think it should be worth. The minimum taxable wage for income payment is objected to by the professional middle class and unions with higher wages. The social security for a family with two children which is $540 today, should be --to protect their earning power-- at $630. The limits on which the State stops paying family allowance are too low, excluding a large portion of workers.

Real estate values, urban and rural, are according to provinces and municipalities very far from the values of the market due to years of not modifying in a high inflation environment. Electric rates are unadjusted and part of the utility companies are at the edge of acreditor meetings and without investment. Gasoline doesn't minimally correspond to the evolucion of costs. Transport fees have produced the nationalization of the system, they live on subsidies, investment is nill and the quality of service a disaster.

According the the government, import duties are very low and because of this they put obstacles to the entry of products. The camp heavily thinks that export duties are too high and affect the production of exports. Interest rates on dividends, the real ones, are negative and discourage saving. Fiscal pressure has grown greatly and affects the private sector, just as much property owners as workers. Public spending is outgrowing income and the deficit and debt reappears in the national government and the provinces.

We could keep going and going on this path. Everyone has a good part of reason. We are facing an off square economy. An economy where all the prices and monetary variables are unadjusted.

The combination of unrecognized inflation and "patch" politics has created this situacion. The result is that vital data of the economy is far from what should be a combination of reasonable "relative prices" for a medium country with intermediate productivity, that needs to maintain growth rates and high investment to be able to produce dignified, stable work "en blanco" in accordance with the evolucion of its population, particularly the young. A country that needs this growth to advance in a distribution of income with a genuine course of justice and social improvement.

This off square has its costs. There is, following the order of the opening title, less capacity to compete in our own market and overseas than what's necessary. There are more poor than what equity and sociopolitical equilibrium demand. There are less direct taxes and more taxes on consumption (regressive) than there should be. Direct or outsorced public services are old, unsafe, and low quality, without an outlook of change as long as there aren't funds to invest and as long as subsidies are distributed to concentraded groups and/or sectors of society that don't need them or demand them.

There is a folkloric yet harmful prohibicion on the importation of equipment, machinery, and parts that aggravates the problems of productivity and employment. There is discouragment to the production and free commercilization of the principal generator of hard currencies of the country such is "el agro" and "la agro" industry. There is insufficient saving of the nacional coin and scarce financing capacity. There is an insatiable voracity for taxes that lives along with great pockets of evasion and fiscal circumvention. There is unsustainable public spending, pathetically distributed.

What's worse, there is a temptacion on the part of the government, via short term measures, contradictory and inorganic, fixing issues one by one, with interventions that are growing, volatile, authoritative, discriminatory, with discourses that are empty shells without content. But more importantly, there are failures each day more noticeable by the citizen, progressive failures, draining and paralyzing.

While the government disregards the reality that contradicts it, in some enlightened circles the dream appears that this same government o another realizes a "rodrigazo."

Do you remember in 1975, a government and a peronist president? Everything at once, everything fast, supposedly to put "order" to the chaos of relative prices, that naturally unleashed a distributive war. And after... we know.

An economy is like a clockwork mechanism. You can't fix it by hammering it. You can't fix it by throwing the pieces into the air, nor by watching them in isolation. You have to fix it with extreme care. Each gear is by itself an irreplaceable treasure, it has value itself and must fit exactly with the others so that the mechanism may function and the needles don't move in the opposite direction of the march of time, of history, of the future.