By Alejandro A. Tagliavini *
The Spanish Language International Congress, held in the city of Córdoba, Argentina, and inaugurated by King Felipe VI, particularly the conference on artificial intelligence given by José María Álvarez-Pallete, make it clear the emergence of radical cultural changes in the coming decades. And, perhaps, people will be no longer interested in governments presidents, but rather in more important things, to begin with, their own lives.
But, if by chance the Argentine president, Mauricio Macri, who promised “zero poverty” during his campaign, is remembered he will very probably be evoked as the one who achieved the poverty highest record, particularly of the poor children.
Let us analyze the argentine financial market. The Buenos Aires Stock Exchange, so far in 2019 advances 11%, while 14% devalues-against the dollar-the peso that carries an inflation of 13%. During March, the bonds in dollars issued by the Argentine government decreased an average of 3%. Most of the Argentine shares listed on Wall Street ended down. On the other hand, the interest rate of fixed terms in local banks barely exceeded 3%, losing against inflation -3.5% – and the dollar.
Thus, the best investment is to buy dollars and have them without producing. That is to say that Argentina will disinvest because the profitability of the peso economy is negative due to extremely high taxes, uncontrolled inflation and the Central Bank’s benchmark interest rate that almost reaches 70%. In other words, the economy will continue to fall because Macri is doing what he has done during his 14 years as a government official -beginning as mayor of Buenos Aires- making the State bigger at the expense of the private sector getting smaller.
Poverty grows because the coercive way in which the State takes resources from the market increases: taxes, inflation and indebtedness / high rates. And all coercion harms the most vulnerable. Inflation – the excess of emission to solve State expenses- hits the most modest, because the entrepreneurs raise the prices.
While interest rates make credit inaccessible, according to the LCG consultancy, zero poverty would mean an extra transfer of resources in the hands of the state, for US$ 5,500 million, to the 2.1 million poor Argentine households, an increase in social spending by 1.7% of GDP when the IMF authorizes only 0.3%.
Now these resources are coercively taken from the market harming the poor the most for entrepreneurs pay taxes by rising prices or lowering salaries. So increasing social assistance would deepen poverty because it would mean more money taken from the poor going through a State bureaucracy that would take a big part and revolving to the poor just a small part.
According to official data, the number of poor Argentines in 2018 reached 32%, 6 percentage points (pp) more than in 2017 when it was 25.7%, and the number of poor children – from 0 to 14 years old – grew from 39.7% to 46.5%.
Thus, at this pace by the end of Macri’s second term – if he wins re-election in October – he will have achieved more than 50% of poverty in Argentina. When what he should do, on the contrary, is deregulate the economy and lower taxes, inflation and rates so that each person can work, with their money, to develop.
* Member of the Advisory Council of the Center on Global Prosperity, Oakland, California