More Economic Measures & more – 28th Sep 2023

¡Buenos días from The Springs! This is the Rorshok Argentina Update from the 28th of September twenty twenty-three A quick summary of what's going down in Argentina.

On Tuesday the 26th, Economy Minister Sergio Massa announced yet another set of measures to battle inflation. This time, the government is rolling out a plan to provide bonuses to informal workers, amounting to 94,000 pesos (125 dollars at the parallel exchange rate) split into two payments, one in September and another one in October.

Meanwhile, unemployment beneficiaries will receive two bonuses of 10,000 pesos during the same period (a total of twenty-six dollars). To finance these bonuses, the government plans to expedite income tax payments for banks, financial institutions, and insurance companies.

On top of those bonuses, Sergio Massa dropped some tax-saving news for freelancers and small-to-medium-sized businesses. The package includes deferments on specific taxes until the end of the year and an increase on the threshold for the income tax to 160,000 pesos a month (a little over 200 dollars).

Monotributistas, often informal or self-employed workers, won’t get booted from the system for surpassing earnings limits or falling behind on payments. Also, SMEs wrestling with debts will have access to a 120-month repayment plan with a monthly interest rate of approximately four percent.

There’s another measure you should keep in mind: until the 31st of December, citizens will be eligible to get a refund of the Value Added Tax, known as IVA, on essential items when purchased with a debit card. The refund is limited to 18,800 pesos per month (some twenty-five dollars) and it will be automatic for workers earning up to 708,000 pesos monthly (or 950 dollars), retirees, self-employed individuals regardless of their category, domestic workers, and recipients of the child allowance program.

If you want to check whether you’re eligible to get the IVA refund, head over to the new website created by the National Tax Revenue Administration, the AFIP. Link in the show notes!

Additionally, eligible workers can access loans of up to 400,000 pesos (more than 500 dollars) repayable over twenty-four, thirty-six, or forty-eight months with a fixed installment and a fifty percent interest rate. Once all the steps to request it are completed, the money is credited to a credit card and there’s a three-month grace period until the payment of the first installment..

In other news, Senator Alfredo Cornejo will be the governor of the Mendoza province again. He held the position from twenty fifteen to twenty nineteen. Cornejo garnered almost forty percent of the vote in the provincial elections, securing a significant win for Argentina’s main opposition coalition, Together for Change or Juntos por el Cambio. Throughout his campaign and after his win, he emphasized the need for a safe and sustainable change in Argentina, urging support for Patricia Bullrich‘s presidential ticket.

Speaking of Bullrich, the presidential candidate posted a video in which she proposes building a maximum-security prison and naming it after the Vice President, Cristina Fernández de Kirchner. She argues that it symbolizes Argentina’s need to end impunity and ensure that those who have committed crimes like theft, drug trafficking, and corruption serve their sentences.

While her proposal has sparked criticism from various fronts, including members of her own coalition, Bullrich is committed to the idea.

From one presidential candidate to another, during a meeting with US President Joe Biden at the United Nations General Assembly, Brazilian President Luiz Inácio Lula da Silva expressed concerns about the state of democracy in Argentina due to the rise of Javier Milei. He criticized the rise of far-right figures who offer simplistic and incorrect solutions as a response to neoliberalism’s failures.

Also related to the elections, the increase in the value of YPF bonds, Argentina’s state-run oil company, is losing steam as investors believe it’s time to sell ahead of the country’s presidential elections in October. YPF bonds due in twenty twenty-five have seen a significant climb in the past year because they offer better yields than other state oil firms in Latin America, but with uncertainty surrounding the incoming administration, investors are concerned about the economic situation and macro imbalances.

Moving on, according to the National Statistics Bureau, or INDEC, Argentina’s unemployment rate fell to around 6% in the second quarter of the year, down from 7% in the previous quarter. However, experts are ringing the alarm bells about the lack of pension contributions among workers. With almost thirty-seven percent working in the underground economy, a significant number are operating without pension contributions.

Speaking of financial informality, Mercado Pago, the fintech arm of Mercado Libre, has a beef with the Central Bank. The country’s primary financial institution introduced a technical measure on Monday, the 25th, which separates platforms for debit payments and transfers. This will create challenges for the millions of users trying to add money to their Mercado Pago accounts (or any other digital wallet for that matter) because users will have to manually authorize the automatic debit requested with their bank.

The Central Bank argues that the measure is aimed at preventing fraud, as the new process will require the express authorization of the customer. For Mercado Pago, this is an attack against financial inclusion. And for those watching it all unfold, it’s another example of the government’s strained relationship with private businesses.

On that note about digital wallets, Pierpaolo Barbieri, the CEO of Ualá, said that Javier Milei’s proposal to dollarize Argentina’s economy could have a positive impact on long-term lending. He believes that banks would be better equipped to offer longer-term loans, addressing the limited access to formal credit in Argentina.

His take is different from that of most mainstream economists, who have deemed Milei’s dollarization proposal unrealistic and potentially inflationary.

And it’s not only economists that have an issue with it. Horacio Rosatti, the Supreme Court Chief Justice, cited the dollarization proposals as a violation of Argentina’s Constitution. In an interview with the Spanish newspaper El País, he emphasized that the Constitution requires a currency printed in Argentina.

Ironically, while the conversation of dollarization is happening, Argentines are reconsidering their summer vacation plans due to rental prices being listed in dollars. Some popular coastal destinations are becoming financially inaccessible for many, such as Cariló and Pinamar. On top of advertising rentals in dollars, some properties are doubling or even tripling their prices compared to the previous season.

The uncertainty surrounding the economy and upcoming elections is further discouraging vacationers from making reservations, with hopes that the pricing outlook will become clearer after the vote.

In other news, Argentina and Paraguay have been disagreeing over the Hidrovía waterway tolls. Argentine customs officers have detained several tanker trucks carrying liquefied gas for five days at the border with Paraguay, but will be released following negotiations.

This development comes after a recent incident where Argentina also held and later released fuel barges, shortly before Paraguay cut off its electricity supply to Argentina. The seizure raised concerns due to the cargo’s exposure to the region’s heat. The move was called into question as it might have been a retaliatory measure related to negotiations over the hydroelectric dam and the dispute over toll charges on the Paraguay-Paraná waterway.

While this barely made the news in Argentina, the issue escalated in Paraguay, and the video of a deputy urging his country to buy missiles in order to bring Argentina into line went viral.

While this has nothing to do with the Paraguay conflict, Jorge Taiana, Argentina’s Defense Minister, has signed a letter of intent with an Italian aircraft manufacturer for the acquisition of eight AW 109 helicopters. These helicopters will be used for surveillance operations in the South Atlantic, enhancing the Navy’s patrolling capabilities in the Exclusive Economic Zone.

In other words, they will be used to enforce maritime laws and conduct surveillance in an area of strategic importance for the country.

To end on a lighter note, recent surveys revealed that Argentina wears the title of the world’s pet capital. Eight out of ten Argentine families have at least one animal in their homes, with dogs topping the list, followed by cats. This pet passion led to a booming pet industry, with pet shops offering everything from coats to cat cafés.

That’s it for this week! Thanks for joining us!

This Argentina Rorshok Update is one of the country-specific podcasts we do.

But we've been experimenting with other topics, and we have a new show about the Arctic, where we update you on everything going on North of the Arctic Circle. The Arctic Update is the third of the new series, along with the Ocean and Multilateral Updates.

You can look for them in your podcast listening app of choice or follow the links in the show notes! Tell your friends!

¡Nos vemos la próxima semana!