Beset by crisis, Argentina's Macri reshuffles cabinet and raises export taxes
Last edited Mon Sep 3, 2018, 08:05 PM - Edit history (1)
Amid the most serious financial crisis since the 2001 collapse, Argentine President Mauricio Macri announced a series of further cost-cutting measures including an increase in export taxes, as well as the elimination of nine of the nation's 20 ministries - including the Health Ministry.
The measures are designed to expite IMF approval for an $18 billion advance Macri requested on August 29 from the $50 billion, 3-year credit line agreed to on June 8. The advance is in addition to $15 billion borrowed from the credit line on June 22.
Markets reacted negatively to Macri's announcment, with the dollar gaining another 2.7% to 39.04 pesos - nearly erasing Friday's recovery. The dollar had reached 39.63, easing only after the Central Bank sold $100 million from its reserves.
From bubble to bailout
The June IMF bailout was approved amid a wave of capital flight of some $25 billion so far this year, triggered by official data showing the nation's 2017 current account deficit doubling to a record $31 billion.
Efforts to stem the flow, including raising the Central Bank discount rate from 27% in April to 60% currently, have thus far failed: The peso has since lost half its value.
Higher interest rates are in turn exacerbating a recession that began in April, with GDP down 6.7% as of June and retail sales down 8% in August. Auto sales plummeted 25.5%.
Fuming farmers
The announcement was panned by not only the opposition - which notes that, like many of Macri's past measures, these are being imposed by decree and without congressional review - but also by his most influential supporters: the agro-export and landowner lobbies.
Tax hikes on agricultural exports, which Macri estimated would raise up to $7 billion next year, have angered the Argentine Rural Society (SRA), which represents large landowners and has long been one of the nation's most influential groups.
"Changing the rules of the games would be bad for agricultural potential," SRA head Daniel Pelegrina said.
Export tax cuts, which Macri decreed within days of taking office, have, however, failed to boost export income despite rising commodity prices.
They instead added to budget deficits, which under Macri rose 40% in dollar terms to $34.4 billion in FY2017. The nation's trade deficit meanwhile ballooned to $8.5 billion as trade deregulation led to soaring imports.
Departments and deck chairs
Macri's decision to shed nine of the nation's 20 ministries, to be subsumed into others, received mixed reactions.
Some changes were welcome by most observers - particularly the elimination of the "Modernization Ministry," which created 146 new, top-level patronage posts since Macri established it (including the minister's wife).
Macri reportedly sought replacements for the Foreign, Defense, Education, and Economy ministries - but all prospective appointees refused.
The elimination of the Health and Labor ministries was in turn condemned by the medical community and the labor movement.
Provincial health ministers and doctors' associations warned that demoting the Health Ministry would lead to smaller budgets, less independence in public health decisions, and fewer federal health programs.
Spending on vaccines, they note, has already been cut.
At: https://www.bloomberg.com/news/articles/2018-09-03/argentina-unveils-new-crop-tax-as-macri-seeks-to-balance-budget
And: https://translate.google.com/translate?hl=en&sl=es&tl=en&u=https%3A%2F%2Fwww.france24.com%2Fes%2F20180902-macri-eliminara-ministerios-gabinete-argentina
A protrait of famed former First Lady Evita Perón looks out from the Health Ministry in Buenos Aires.
Macri's demoting the Health Ministry to a sub-cabinet department has been especially controversial.
"They are ideologically convinced that the way is austerity, and returning favors to speculators," CGT labor federation head Héctor Daer said. "What they don't talk about is the social crisis that follows."
