Argentina
Oct 23rd 2008 | BUENOS AIRES
From The Economist print edition
ACROSS the developed world, solvent governments have temporarily nationalised banks whose survival was in doubt. Argentina, which often resembles the rest of the world seen through a distorted mirror, likes to do things differently. There the private pension system, which has suffered investment losses but is otherwise sound, now faces permanent nationalisation by a government whose own solvency has been called into question. “The G8 countries are protecting their banks, and we’re protecting our workers and retirees,” declared President Cristina Fernández de Kirchner, as she announced a bill containing the measure on October 21st.
The immediate effect was to leave them less protected: the Buenos Aires stock-exchange index fell 24% in two days, and investors dumped Argentine bonds, sending their yield soaring to 28%. Many economists and opposition politicians fear that the government’s intention is to raid the pension funds to fill a widening fiscal hole. “A legalised robbery” was how La Nación, a newspaper, dubbed it in an editorial.
The private pension system was set up in 1994 by Carlos Menem, a conservative president. It was part of a wave of reform that saw many countries in Latin America set up private schemes, in which workers pay contributions into individual retirement accounts. This was a response to the lamentable record of the region’s state-run pension systems, whose pensions were often shrivelled by inflation or by government raids on their funds. Mr Menem’s scheme allowed workers to choose between staying with the state system or switching. By 2003 84% of workers with a pension scheme had chosen the new private funds. They have 9.5m accounts and assets of $30 billion. They are the largest investors in Argentina’s depleted capital markets. Their demise would make it far harder for local firms to raise money.
The private system, which now comprises ten funds whose managers include Britain’s HSBC and Spain’s BBVA, has had its problems. Its introduction carried a transitional cost for the government, as the flow of contributions to the state-run scheme fell. This was one of several factors behind Argentina’s financial collapse of 2001, in which the government defaulted on debts of $81 billion. The funds’ returns have been disappointing, partly because they charge hefty commissions but also because the state has required them to hold a lot of government bonds (these amount to 55% of their portfolios). In 2001, in a desperate effort to stave off debt default, Domingo Cavallo, the economy minister, forced them to swap bonds (and cash) for long-dated or low-yielding paper. Last year Néstor Kirchner, Ms Fernández’s husband and predecessor as president, forced the funds to dump some of their foreign investments. He also allowed holders of individual accounts to switch back to the state system at no charge (1.2m did so).
Ideological hostility to the private funds played a part in Ms Fernández’s decision to scrap rather than reform the scheme. Her husband reversed several of Mr Menem’s privatisations. But fiscal need may have been a bigger motive. “It looks like they want to use the workers’ money for non-pension spending,” says Gregorio Badeni, a professor at the University of Buenos Aires. “The reason private pensions were instituted in the first place was to stop the government from doing that.”
Ahead of last year’s presidential election Mr Kirchner stepped up public spending, especially on public-sector wages and pensions. Now the government is strapped for cash. It has relied on taxes on farm exports. But the world price of soyabeans has fallen by 44% in three months, cutting tax revenues by $2.7 billion. And over the next two years $23 billion of public debt falls due.
Argentina has not been able to roll over this debt because investors’ lack of trust in the government has led them to demand astronomical interest rates. The main foreign buyer of Argentine bonds recently has been Venezuela, but Hugo Chávez demands a hefty yield and anyway now has his own fiscal problems (see article). In an attempt to charm foreign investors in September Ms Fernández said she would pay off $7 billion owed to creditor governments, using the Central Bank’s reserves. She has also said that she will “analyse” a plan to pay off those bondholders who refused the tough terms offered by Mr Kirchner in 2005, when he restructured the defaulted debt. But these moves have failed to reduce interest rates on Argentine debt.
By taking over the private pension system, Ms Fernández could solve her cashflow problem for the remaining three years of her term at a swoop. It would put assets worth 10% of GDP at the government’s disposal, and allow it to channel an additional $400m a year of workers’ contributions into public debt. The government could also force the pension system to roll over the 10% of public debt held by the private funds on terms of its own choosing. Of course, all this money belongs to Argentines, not to Ms Fernández. But under the bill, it would be administered by government officials, overseen by a congressional committee. They are likely to give priority to the short-term claims of the public finances at the expense of impoverishing Argentines and their children in the future.
Congress is indeed a possible obstacle to the government’s pension grab. Most opposition parties say they will vote against the bill unless it contains safeguards against malfeasance. The president’s majority is uncertain: earlier this year, lawmakers from her Peronist party helped to veto her plan to raise taxes on farmers. But the private pension funds are unpopular with the public.
If the law is passed, account holders will deluge the courts with lawsuits, as happened when bank deposits were frozen during the 2001 collapse. By proposing the nationalisation, Ms Fernández has further undermined faith in her government’s solvency and in property rights. “Where is the state going to stop now?” asks Miguel Kiguel, a former finance official. “Today they’re taking the pension funds. Who’s next?”
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WHEN Cristina Fernández de Kirchner selected a turncoat member of the opposition Radical party as her running-mate in her successful campaign for Argentina’s presidency last year, the choice looked like a canny ploy to win votes beyond her Peronist party’s working-class base. Ms Fernández’s assumption that her vice-president, Julio Cobos, would show more loyalty to her than he did to the Radicals now appears to have been an act of hubris. As vice-president, Mr Cobos had the tie-breaking vote in the Senate on a crucial tax bill backed by Ms Fernández. On July 17th he voted against his own government, dealing a debilitating blow to her eight-month-old presidency.
Ms Fernández has spent the past four months in a fierce battle with Argentina’s farmers. They launched a campaign of strikes and roadblocks after the government raised taxes on soyabean exports to nearly 50%. The public backed the farmers and the president’s approval ratings tumbled. But Ms Fernández and her combative husband, Néstor Kirchner, who preceded her as president and now runs the Peronist party, refused to reach a compromise and lower the taxes.
The two sides were locked in stalemate until the Supreme Court—a majority of whose judges were appointed by Mr Kirchner—said that it would rule on whether the taxes, which were implemented by diktat rather than by legislation, were constitutional. To avoid a judicial rebuke and to defuse the protests against her, which have taken the form of the noisy banging of pots across the country, Ms Fernández asked Congress to ratify the levies last month.
This was a miscalculation. Ms Fernández underestimated the pressures on her party’s legislators from the rural provinces, where voters were staunchly opposed to the taxes. Despite holding comfortable majorities in both houses, her block in Congress had to establish a costly scheme of payments for small farmers to win a close vote in the lower house. The bill then passed to the Senate, where a stampede of defections from Ms Fernández’s supporters produced a 36-36 draw.
The decision thus fell to Mr Cobos, whose relationship with the president had become frosty. Ms Fernández had barely spoken to him in a month. The beleaguered vice-president all but apologised to her as he cast the vote that handed her the defeat. “The Argentine president will understand me,” he said, “"because I think that a law that doesn’t provide a solution to the conflict won’t achieve anything…I ask forgiveness if I am wrong.” Forgiveness has not been forthcoming: on July 21st, Ms Fernández had six officials loyal to Mr Cobos sacked.
Ms Fernández’s defeat marks a turning-point both for her government and for her country’s fragile system of checks and balances. Mr Kirchner brooked no challenges to his authority as president, treating dissent as indistinguishable from treason. Argentina’s Congress has rarely been strong enough to put meaningful limits on the executive. Traditionally, influential provincial governors have instead served as the primary counterweight to the presidency. But Mr Kirchner cowed them too during his four years in office, thanks to high approval ratings and an ample budget surplus, which gave him an unusual amount of freedom to direct spending to supportive regional officials.
Until the defeat, Ms Fernández had mimicked his hectoring style, repeatedly accusing the farmers of seeking to topple her government. Mr Cobos’s vote should undermine this way of governing. Unlike her husband, Ms Fernández is now unpopular (her approval rating is just 20%) and her government is short of money (soaring public spending has depleted the treasury). She faces a legislature that has ceased to be a rubber stamp and provinces that will no longer tolerate the central government in Buenos Aires appropriating their wealth.
Something of the new landscape has been revealed in the week since the vote. On July 18th Ms Fernández issued a resolution reducing the export taxes to their previous level. She has reverted to Peronist type, announcing that Aerolíneas Argentinas, a crumbling airline, would be nationalised after nearly 20 years as a private company. A week later her cabinet chief, Alberto Fernández (no relation), resigned. Mr Fernández was her closest aide, de facto press spokesman, and chief negotiator in the failed talks with the farmers.
Ms Fernández has three-and-a-half years left of her term, and so it is too early to write her political obituary. The opposition remains weak and divided. Yet Mr Kirchner has bequeathed her a formidable list of problems: a pliant, little-respected cabinet; a doctored price index which reflects less than half of the true rate of inflation (which is around 25%); a mixture of subsidies and price controls in energy and transport that have discouraged investment and strained public finances; and a sprinkling of corruption scandals.
Add this defeat and Ms Fernández is now faced with a choice: either break with the policies of her husband less than a year after he handed over the presidency to her, or live the next four years of her first term as the longest-serving lame duck in Argentina’s recent history. Ms Fernández campaigned as a moderate consensus seeker. She will need to start governing like one if she hopes to salvage her presidency.
LOS ANGELES, July 29 (Reuters) - An earthquake struck just east of Los Angeles on Tuesday, rocking tall buildings and rattling nerves across Southern California, but causing no serious injuries or major structural damage.
The quake hit at 11:42 a.m. local time (1842 GMT) about 30 miles (48 km) east of Los Angeles in suburban Chino Hills and registered magnitude 5.4 -- making it the strongest seismic event centered near America's second-largest city since the 6.7-magnitude Northridge quake in 1994.
It was followed in the next few hours by more than two dozen aftershocks, the largest measuring 3.6, and geologists said there was a small chance it could be a foreshock to a larger earthquake still to come.
Espero que los geólogos no se equivoquen! Pavada de cagazo, por lo demás, parecía que no terminaba nunca.
Publicado en La Nación el 22 de julio de 2008
El Gobierno podría duplicar el superávit primario que obtiene si dejara de pagar los subsidios con los que contiene, por ejemplo, las tarifas de enegía eléctrica, gas, los precios de algunos alimentos y los valores del gas oil para el transporte.
¿Funcionaría igual la economía? En principio, algunas situaciones cambiarían bastante.
En términos ideales, cuando el Estado ofrece un servicio en forma gratuita, como salud o educación, realiza un gasto que genera un ahorro entre los privados que lo utilizan. Ese gasto público reemplaza gasto privado o genera ahorro privado.
La actual administración, con su monumental maraña de subsidios que no para de crecer, genera justamente ahorros a quienes consumen lo que se subvenciona. Si se eliminaran de un solo golpe esos gastos deberían actualizase valores desde la leche hasta las tarifas aéreas, pasando por el boleto de colectivo. En términos muy globales, empresas y particulares deberían asumir gastos iguales al superávit primario del Estado.
Pero en la realidad el esquema no es tan simple. Para poder sostener esos subsidios el Estado ha creado, mantenido o aumentado muchos impuestos. Si desaparecen las compensaciones y muchos valores hoy contenidos se encarecen habrá presiones para reducciones de gravámenes. ¿Cómo funcionaría esto? Es difícil de vislumbrar.
La enorme complejidad del esquema de gravámenes y compensaciones esconde la intención de la actual administración de manejar la distribución de rentas y beneficios cruzados entre sectores.
De manera muy global, el esquema de retenciones grava mucho más al campo que a la industria. Lo que querría decir que granos y oleaginosas subsidian a las fábricas.
Cuando el Gobierno hace bajar artificialmente el precio global de los alimentos los hace más accesibles para personas de bajos recursos. Pero también los abarata para los ricos y para las compañías que los adquieren para elaborar bienes que se exportan y generan fuertes ganancias.
Por ello, a muchos beneficiarios de subsidios se les ha colocado impuestos, en un intento por moderar el beneficio, lo que genera un sistema todavía más complejo y difícil de desentrañar. Es el caso de los cargos específicios a la energía de las fábricas.
¿Debería el Gobierno abandonar por completo esta política y liberar todos los valores y a todos los actores privados a su suerte? Pareciera el otro extremo. Hasta economistas ortodoxos como José Luis Espert señalan que deberían eliminarse compensaciones y diferencias artificiales y permitir que los alimentos tengan en el mercado interno precios más parecidos a los internacionales. Pero que a la vez se debería armar un esquema que permita entregar gratis la alimentación de los sectores más vulnerables.
No todo sería ahorro para el Estado y más gasto para los privados.
Como idea general, no está mal. Pero no tiene en cuenta el "costo argentino" relacionado con los funcionarios públicos que aprueban esos subsidios. Es tan obvio que no hacen favores de macanudos que son. Concretamente, los subsidios promueven corrupción y clientelismo político y financiero. Un horror.
