Real challenge for Xavier Miley after omnibus law shipwreck Will this be able to control inflation?

A closer look at the Caputo plan leads straight to that old joke about the farmer teaching his donkey to work without eating and, when he succeeded, he died. it may be that xavier miley Does not know it, or has not been able to understand it, because it is the only way to explain the incredible “savings” that are being imposed on almost the entire Argentine population spread over provincial areas, because it has no governor of its own, the President considers alien. Are. For your responsibility.

It may also be that he knows it and is convinced that the end can admit of a rewriting, just as he intends to rewrite the country’s history and redesign its future. Such omnipotence would explain the avoidable end of the Omnibus Law and their incoherent reaction to all the operations and political operations it provoked in the proto-government forces.

The media focused on the details of the spat between the government and governors and Mauricio Macri’s hope of fishing in troubled rivers, but when the dust clears a little it will become clear that the fate of the government is not so much at stake as the anti-Peronist vote. Competing for but knowing to what extent the donkey will humbly accept its fate or somehow stand to escape it.

freedom does not advance

For ordinary humans there are two ways of doing things: by action or by omission. In case of a liberal government, the option disappears. The only initiatives that have been successful so far are those that do not require any management effort. The rest of the ships are wrecked.

The last and perhaps the most obvious example is what happened with the omnibus law. It started with 638 articles, continued with about 300, and ended with nothing. With all the “friendly opposition” desperate to support him, they were unable to form a majority to pass it. Fiscal measures were central to the project and were the first to be cut. If what was sought was a signal of governmentality for markets, the opposite turned out to be the case.

Once the law fell, the secret to victory was created on social networks, which is the only sector that the government recognizes. That the whole thing was a ploy by the leader to expose caste; A project presented as inevitable in the short term will actually have long-term impacts. A story that is only suitable for confident people.

The same matrix of incompetence is on display in more mundane matters. They were not able to implement the SUBE card registration scheme, which was fundamental to the entire plan to increase ticketing in trains and buses. They also failed to move forward with the new partition project to cut electricity subsidies, so they were only able to operate on the minority sector that had already abandoned them. Reaching the absurdity, Minister Guillermo Ferraro, whose dismissal was announced with great fanfare 45 days after taking office due to the leaking of Miley’s phrase against the governors (“I’m going to leave them penniless, I’m going to melt them “), remained in his post this Friday at the request of the same government that fired him.

Retired and salaried, Miley’s only cards

Luis Caputo was in charge of providing the main argument in saving the President. “The legislation was not necessary for the crisis because without it the numbers would have been the same, as January’s financial results showed,” former finance chief Messi said, without giving details of how the “miracle” was achieved. If you watch it, you’ll understand why No other government likes to shake it,

Almost all fiscal “savings” come directly from the pockets of retirees and the salaries of state employees, their speed and depth incomparable with any other previous adjustment. Neither Macri, nor Menem, nor the dictatorship dared to do so much.

Numbers that Caputo doesn’t count and 1816, one of the city’s favorite consulting firms, have provided for the curious:

• Primary expenditure, i.e. that which does not include debt payments, fell 36.9% compared to January 2023.
• To reach such a figure it was not necessary to point to “political expenses”, it was simply necessary to strike a historic blow at retirement and pensions, which are the main item of the official budget: They collapsed by 43.2%,
• What was allocated to public employees declined by 18.2%, which included a 19.8% decline in AUH and family allowances and a 40.8% decline in social programs.
• Public works and transfers to the provinces reduced to almost zero, but these items, which have such an impact on employment creation throughout the national territory, are barely felt in the total expenditure of the state.
• In the area of ​​salaries of registered private employees, Miley achieved, in less than two months, to bring them to the same level as before the 2001 crisis.

The clear conclusion from these data is that The only thing the government did in economic matters was to increase inflation (due to massive devaluation and elimination of all controls on business engagement) and not to increase wages or pensions., Something that all conservative governments strive for and that only puts limits on the patience of those affected.

Through incompetence or audacity, Miley and Caputo did not create a prevention network that could reduce costs for the middle and lower sectors. Worse, through incompetence or audacity, he devoted himself to destroying those areas of the state that he had hitherto been in charge of. The satire of this management model is the 30-block queue of hungry people, called out one by one by Minister Sandra Pettovello.

dream of reducing inflation

To change this disappointing attitude before the novelty wears off, Miley needs to show some success in fighting inflation Celebrating “25% of December that could have been 30” is more tangible. But, beyond official insistence, there are not many reasons for optimism.

Inflation will hit nearly 100% in April, increasing the likelihood of another devaluation. As the market gods dictate, it will be difficult to avoid a self-fulfilling prophecy, as this is what most analysts predict and agricultural producers expect their dollars to last. If this happens, there will be another surge in inflation.

Constant indexing of all contracts in the economy (starting with the most recently released hires) and the wage increases that unions are receiving (also delayed due to inflation) They guarantee a monthly floor that is unlikely to fall to single digits immediately., And it is not necessary to remember that although the 20/25 points promoted by Miley are very bad, the 8/12 featuring the last months of Massa were so terrible that they managed to install the libertarian in the Casa Rosada.

“How ugly it is to give bad news,” one might say, paraphrasing Fernando de la Rúa, but despite the surge in December and January, the famous realignment of relative prices is just beginning. What is missing is the jump that would be caused by the abolition of the rate subsidy and the flood that rising prepaid and private school fees would mean for what remains of the middle class. A pace that will persist over time as everything adjusts for inflation and the exchange rate, whichever is higher.

Denied the return of profits to workers and the increase in withholding due to the withdrawal of the omnibus law, the government can only increase its income through Congress without imposing a tax on fuel and by increasing the PAIS tax that impacts imports. and expenditure in dollars of the entire population. As anyone knows, the prices of both inevitably end up being the same.

Those who count on a recession that will certainly reduce growth should take into account that, thanks to unrestricted opening up, world markets could absorb what would be expected from validating weak Argentine wages. Denied, at least, food and fuel, two major local commodities. inflation. The recession will also affect VAT and profit collections, unbalance the public accounts and lead to new adjustments in what is even more of a vicious circle.

If everything goes wrong it could be even worse. In desperation, Miley is once again able to leap into the void of dollarization.

donkey’s decision

Undeterred by the bad news, the government is betting that all these doubts will be cleared up by a decline in the fiscal deficit, which is the sole purpose of so many sacrifices. Businessmen will happily line their pockets and private investment will replace all the missing public investment. In the official narrative, this will create a future of registered jobs and wage recovery. Even though Caputo made the mistake of talking about a “second semester”, No such “shoot” of heaven has yet been seen,

What is happening in large economic groups looks different. Accustomed to the transience of generous dreams, they wait to see to believe. In other words, to applaud and support until the economy looks somewhat more promising than the current wasteland, with a decline of between 20 to 30% in all relevant parameters. Meanwhile, the majority took the opportunity to include their historic demands in the DNU and are trying to convert them into earned rights before Congress or the judiciary dare to put a stop to them.

This is a scenario where the donkey joke is waiting to be rewritten. Miley and her friends dream of finding a way for animals to learn not to eat food and survive. The historical magnitude of the adjustment suggests another end. Regardless of how they got to this point, most Argentines would be forced to put a limit on the experiment. After all, it is a matter of survival.