Massa’s New Economic Measures & more – 31st Aug 2023

¡Buenos días from The Springs! This is the Rorshok Argentina Update from the 31st of August twenty twenty-three A quick summary of what's going down in Argentina.

August has come to an end, but the Economy Ministry is just getting started with a set of measures aimed at easing the impact of inflation — and why not, secure a few more votes for its minister in the upcoming election.

As we anticipated in the previous episode, Sergio Massa unveiled a variety of economic benefits for different groups, including a payment of 60,000 pesos (some eighty-two dollars at the parallel exchange rate) for private-sector workers earning up to 400,000 pesos monthly (about 550 dollars). The state will cover the costs through employer contributions, and the measure is set to benefit some 5.5 million workers.

Similarly, workers in domestic service in private households will receive a bonus of up to 25,000 pesos (thirty-five dollars) over the next two months, which will be proportional to the hours worked. For employers who make less than two million pesos per month (two thousand seven hundred), the state will refund half this payment.

Meanwhile, individuals who follow a simplified tax system paying a fixed monthly fee based on their business category, also known as monotributistas, will enjoy a six-month tax exception. At least those in the categories A, B, C, and D. In addition, workers will have the opportunity to access loans ranging up to 400,000 pesos, repayable over twenty-four, thirty-six, or forty-eight installments, with interest rates lower than any bank’s.

For pensioners, Massa introduced a bonus of 37,000 pesos (fifty dollars) to be paid in September, October, and November.

The list of measures goes on, with the elimination of export duties for regional economies, support for the Alimentar food card program, price controls, among others. For example, the costs of prepaid healthcare plans have been frozen, at least for families with earnings up to two million pesos (two thousand eight hundred dollars).

If you want to read the full list of measures and the respective details in English, follow the link in the show notes.

In stark contrast, the rental law may be leaving the price controls behind. Last week, the chamber of deputies approved the rental law reform, which introduces shorter contract periods and more frequent price updates. If approved by the Senate, contracts would last two years and price adjustments would happen every four to twelve months, depending on the agreement between the two parties.

The reality is, the Senate is damned if they do and damned if they don’t pass the bill. The existing rental law, implemented in twenty twenty, led numerous landlords to remove their properties from the rental market as they were uncomfortable with updating the price only once a year and signing three-year contracts. In the words of members of the opposition, the law destroyed the market with regulations and led to a further increase in prices due to the lack of offer.

But now that this reform is in the talks, tenants worry that they will experience stark increases even more often. The head of the Everyone’s Front or Frente de Todos coalition, for example, argued that while the tenant lives with the sword of Damocles above them, landlords only seek to improve their economic situation.

Speaking of houses, the Central Bank will start monitoring the exchange houses in real time. In short, the country’s main authority in monetary matters has made a move to tighten control over exchange agencies by requiring them to conduct all transactions through an electronic system called SIOPEL. Since the unofficial US dollar exchange rates have been rising a lot, more opportunities have arisen for the so-called rulos, which means curls. This basically refers to exploiting discrepancies in exchange rates to make a profit.

On that (bank) note about US dollars, Business Insider published an article titled Argentina needs a recession, not dollarization, to tackle the peso crash. According to Robin Brooks, chief economist at the Institute of International Finance, what Argentina really needs is not to peg its currency to the dollar, but rather spending cuts to get things back on track. Follow the link in the show notes to read the full article.

The International Monetary Fund, of course, agrees with that point of view. The measures that Massa announced certainly defy the IMF’s call to spend less, but that doesn’t seem to be in the cards right now.

In fact, it’s not the State but the people who are spending less. According to a series of private studies, mass consumption in Argentina took a hit, dropping by sixteen percent in the first week of August compared to the previous month. The year-on-year overall contraction has reached 6%, with slight differences depending on the province. This has affected various product categories, particularly food, personal care, and cleaning products.

With everything that’s going on in the economic sphere, the question remains: who will be the one to turn it back around and, more importantly, how? On Wednesday the 29th, presidential candidate Patricia Bullrich met up with Economist Carlos Melconian, who would likely be her pick for Economy Minister if she won the election. Melconian has been working on an extensive economic plan for the country, encompassing tax, labor, pension reforms, and a comprehensive overhaul of the state.

The idea is for him to collaborate closely with Luciano Laspina, a deputy who currently oversees Bullrich’s economic round-table discussions. Together, they will present the party’s economic plans to the International Monetary Fund.

Bullrich is also considering Laspina for the role of heading the Central Bank. The presidential candidate’s intention is to ensure that the Treasury chief has control over all economic areas without segmentation, a stance she believes was lacking during the Mauricio Macri administration.

Patricia Bullrich also made the headlines this week for saying that if she wins the elections, the country will not become part of the BRICS. President Alberto Fernández announced last Thursday the 24th that the country will join the bloc in twenty twenty-four, and the opposition was quick to… well, oppose the decision.

BRICS is a bloc focused on economic and trade collaboration between emerging economies, including Russia, India, China, South Africa, and Brazil. Some of the countries that will join in twenty twenty-four include Iran, Saudi Arabia, the United Arab Emirates, Egypt and Ethiopia. The reasons why Argentine politicians disagree with joining BRICS have more to do with concerns over Russia’s invasion of Ukraine and diplomatic tensions with Iran over the bombing of the AMIA Jewish center in nineteen ninety-four.

Since we mentioned Brazil, President Luiz Inácio Lula da Silva presented a plan to Argentina that proposes using the yuan to ensure export payments. Using the Chinese currency would help circumvent Argentina’s severe cash shortages and facilitate continued trade between the two countries.

Speaking of trade between the two countries, Brazil’s Itaú, the largest bank in Latin America, finalized a binding agreement to sell its Argentine unit to Banco Macro. Upon the completion of the transaction, Itaú will cater to its corporate clients through its international branches instead of maintaining a physical presence and operations within Argentina. Regular people’s accounts and banking services will probably be transferred to Banco Macro, the acquiring bank.

Moving on — or rather, running on — the 34th Buenos Aires Half Marathon took place on Sunday the 27th. The event drew a crowd of 23,000 participants, breaking its own record. Three Kenyan male athletes claimed the top spots on the podium, and in the women’s category, Ethiopian runners secured the top two positions.

There’s another event taking place soon, although not a sporting one. Arteba twenty twenty-three, the 32nd edition of the prestigious Latin American art fair, will open its doors from the 1st to the 3rd of September at the Centro Costa Salguero exhibition center. Showcasing over 400 artists, the fair aims to attract a diverse audience, from new buyers to international collectors, while introducing innovations such as the Arteba Award for Collectors and the Corporación América Foundation Award.

And that’s it for this week! Thanks for joining us!

We shared Argentina’s top stories of the week, now is your turn to spread the word about these updates!

Don’t forget to hit the subscribe button!

¡Nos vemos la próxima semana!