Caputo’s 10 Measures & more – 14th Dec 2023

¡Buenos días from Greenway Parks! This is the Rorshok Argentina Update from the 14th of December twenty twenty-three A quick summary of what's going down in Argentina.

We’re starting a new era this week with a new administration, and if you thought nothing else could happen in the last three weeks of the year, think again. On Tuesday the 12th, Economy Minister Luis Caputo announced a series of urgent economic measures to address the country’s dire financial situation. In a video message, he talked about the need to confront the deep-rooted fiscal deficit issue to prevent hyperinflation and alleviate the growing poverty, delineating ten new measures.

The ten-point plan includes not renewing state labor contracts from the past year, halving ministries and secretariats, minimizing transfers to provinces, suspending national government advertising for a year, canceling unfinished public works tenders, reducing energy and transport subsidies while maintaining social welfare plans like Potenciar Trabajo, establishing an official exchange rate of 800 pesos per dollar, doubling allocations in the social welfare program Universal Child Allowance and the Tarjeta Alimentar food card and closing the SIRA import system.

The former Economy Minister introduced the Import System of the Argentine Republic, or SIRA, to streamline criteria among trade-related entities. The new system, however, won’t require approval, which means anyone who wants to import products will be able to do so. The official exchange rate rising to 800 pesos per dollar will also incentivize this, although specifics in the import taxes were not disclosed. Caputo hinted at future plans to eliminate all export duties post-emergency.

Speaking of the official exchange rate, we’re facing a devaluation of fifty-four percent. This makes sense considering President Milei’s inaugural speech, which warned of months of economic pain using the words “there is no money,” which Caputo echoed.

On Monday the 11th, as banks anticipated the announcement of these measures, the Central Bank put a temporary lock on dollar access at the official rate. Now, the situation has been normalized, but keep in mind that the exchange rate for credit card purchases in dollars and expenses abroad is now at around 1,280 pesos.

The Federal Administration of Public Revenue, or AFIP, just dropped a resolution changing the taxes on currency purchases and foreign transactions, reducing the tax burden to sixty percent, down from the previous 155 percent. This, coupled with the new official exchange rate, sums up to $1,280, which is almost thirty percent more than a few days prior.

Another decree Milei included in the first batch is one modifying a Macri-era rule against appointing family members to the government. The measure aimed to provide transparency and fight corruption. However, Milei had to toss it out in order to appoint his sister, Karina, as Secretary General to the Presidency.

In case you didn’t know, Karina played a fundamental role in her brother’s career, particularly his presidential campaign. Dubbed “La jefa” or “The boss” by her brother, Karina is the main campaign strategist and decision-maker, as well as the treasurer, overseeing the party’s finances. Her influence extends to every aspect, from setting the agenda to deciding who gains access to her brother. Her role has been put into question, as she might be a manipulative force. Still, she can be the linchpin of La Libertad Avanza, and the only person Javier truly trusts.

We have one other measure worth diving deeper into, and that’s the reduction of ministries and secretariats. Both were slashed by fifty percent, meaning there are only nine ministries now: Interior, Foreign Affairs, Defense, Economy, Infrastructure, Justice, Security, Health, and Human Capital.

The head of the Human Capital ministry is Sandra Viviana Pettovello, a figure close to the president and a family expert. She holds a degree in Journalism from the University of Belgrano, a degree in Family Sciences from the Universidad Austral, and a postgraduate degree in Family Policies from the International University of Catalonia, Spain.

In his inaugural speech, the president also declared the end of decades of failure, comparing it to the fall of the Berlin Wall and marking a turning point in history. He also acknowledged the need for a five-point GDP fiscal adjustment and emphasized the urgency to clean up the Central Bank’s liabilities.

Despite anticipating challenges, he asserted that austerity measures were inevitable, rejecting gradualism in favor of shock programs. While addressing potential resistance, Milei vowed to use state levers to advance necessary changes and affirmed a preference for uncomfortable truths over comfortable lies.

Volodymyr Zelenskyy, Ukraine’s president, listened to Milei, and afterward, both heads of state had a meeting. Argentina agreed to host a summit with Latin American leaders early next year. President Zelenskyy aims to garner support from the Global South in the conflict with Russia, and Argentina’s new administration is eager to take a stance against Russia.

On that note about international alliances, Foreign Minister Diana Mondino confirmed on social media that the country will not be joining the BRICS bloc under the new administration. This is most likely due to the new administration’s animosity toward the governments of Russia and China. Instead, Mondino emphasized that Argentina’s focus is on a potential Mercosur-European Union agreement.

From Europe to Israel, President Milei is set to appoint his Rabbi, Axel Wahnish, as Argentina’s ambassador to Israel. Milei connected with Rabbi Wahnish in twenty twenty-one following accusations of being a nazi, and has since been close to Judaism, with plans to convert.

Argentina has been without an ambassador to Israel since twenty twenty-two, following the resignation of Sergio Urribarri due to corruption charges. In addition to appointing Rabbi Wahnish, there are plans to relocate the Argentinian embassy from Tel Aviv to Jerusalem.

In other news, the new administration wants to spark a significant expansion in wheat production, Argentina’s key staple grain. Milei’s commitment to lifting currency controls and eliminating agricultural export tariffs is expected to attract higher wheat production, potentially increasing output by over sixty percent to twenty-five million metric tons in the upcoming growing season.

This move, echoing the deregulation eight years ago under the Macri administration, could have an even more substantial impact due to recovery from a severe drought. The anticipated changes have generated significant expectations in the agricultural sector, with potential global repercussions on the wheat market, already under pressure from ample supplies from Russia.

On that note, Argentina is gearing up to double its wheat shipments to Brazil. These will hit an average of 450,000 metric tons per month in twenty twenty-four, surpassing five million tons annually. With Brazil facing reduced crop yields due to excessive El Niño-induced rains, the increased Argentine supply could reshape the wheat trade dynamics. As the wheat tides shift, Brazilian buyers might lean toward Argentina, potentially bypassing Russia, and enjoying tariff-free transactions under the Mercosur trade bloc’s rules, at least until mid-year.

Moving on, an article in English by El País explores how Argentine entrepreneurs are diving into creative alternatives to single-use plastics. From fungi to yerba mate waste and cassava starch, scientists and entrepreneurs are cooking up inventive materials to replace traditional plastics. For instance, Lucía Famá is developing films from cassava starch and yerba mate waste, creating edible, celiac-friendly, and biodegradable packaging. Meanwhile, biologist Ayelén Malgraf is turning to mushrooms, using mushroom mycelium to craft sturdy materials that replace plastic in pots, packaging, and more.

To read the full article, follow the link in the show notes!

One last recommendation before we go. We’re approaching the one-year anniversary of the World Cup win, so it’s only natural to see related content coming out. For example, two new documentaries hit theaters last week, Elijo Creer and Muchachos. Elijo Creer is the official movie of the Argentine Football Association. It provides an eighty-minute journey through the team’s experiences, narrated by film icon Ricardo Darín. Meanwhile, Muchachos focuses on the passionate fans who celebrated the World Cup victory, narrated by beloved actor and comedian Guillermo Francella.

Aaand that's it for this week! So here's to a bit of holiday spirit. We wanted to thank you for listening, learning, thinking, and for joining us on this new thing called Rorshok we're all doing together. Really. Thank you.

¡Nos vemos la próxima semana!