By Alejandro A. Tagliavini *
The Washington Post and The New York Times, among others, published a column of the AP agency that says that “the economic uncertainty” in Argentina, catapulted among other things by “an annual inflation of almost 50%, one of the worst in the world “, is causing that young people, in search of work, when asked ” if … they would be interested in living abroad, about 80% say yes “.
The situation is so bizarre and depressing that today, in the country “breadbasket of the world” where poverty exceeds 30% of the population, public discussions center in topics like if the poor can or cannot look for food in the trash. It happens that the government of Buenos Aires tried to put a bolt to the street waste containers, with the excuse of preventing people from looking inside them and dirtying the streets with the remains.
The truth is that the State has grown to record levels and so, literally, has plundered the country through taxes, inflation -excess of monetary issue to solve government expenses- and indebtedness.
In June of 2018, when a stand-by agreement with the IMF was confirmed, I tweeted “God help us, US $ 50,000 M -which we are going to pay, and more, the citizens, especially the poor- to finance a government addicted to statism and to cut off liberties. ” By the way, in the past Argentina have had more than thirty agreements and thus, since then, the IMF finances unviable governments.
Those who argue that the IMF is pro-market, following the pro-government propaganda, are incoherent: for survival, this organization will necessarily be a promoter of who gives life to it, the member States, at the expense of its private sectors -its markets- that finance it with taxes that , by the way, fall more strongly on the poorest since the rich derive them, necessarily, downwards: raising prices, lowering salaries, stopping investments and so demanding less labor, etc.
The IMF is a pro-establishment – above all, a pro “financial establishment” – that uses and abuses state coercion to obtain privileges – against the market, the almost 50 million Argentines – such as the Leliq, bonds that the government offers to banks for which it pays an exaggerated rate close to 70%, and to buy those bonds banks pay 43% for fixed terms to ordinary citizens, a difference of more than 25%.
The IMF finances disastrous governments, so that they can continue, charging lower interest rates. While the recent fall of Argentine government bonds implies that their yield reaches 17% annually in dollars, with the “country risk” almost at 900 basis points, without the IMF, the Argentine government would have to pay 9% more on the US rate to obtain a loan, and this would force the politicians to change the economic “model” radically towards one of real GDP growth.
And the worst is yet to come. The economy will continue to fall because the weight (taxes, inflation, indebtedness / high rates) of the inefficient State on the market increases. Credit to the private sector is around 15% of GDP when in Chile it exceeds 110% and in the USA 62% The rest is taken by the State. Regarding inflation, the government implicitly acknowledged the serious failure of its policy – which it is now deepening – by strengthening “Caring Prices”, a euphemism for a shameful state price control.
* Member of the Advisory Board of the Center on Global Prosperity, Oakland, California