In his regular economics and finance column, Darío Banga analyzed the decline in economic activities in the country.
Tomás Modini
@ModiniTomas
The Political Role of Javier Milei
At the start of the column, the discussion at the table centered on the dinner shared by Javier Milei and Mauricio Macri after the PRO voted against the decree that increased the SIDE budget. Regarding this, Darío Banga commented: “For Milei, it was a ‘welcome to politics,’ he realized that he needs alliances, in this case with Mauricio Macri, to govern. It’s not just about being tough, mean, and having aggressive ideas; you need to make alliances.”
“But I was surprised because he knows well that he came to power through an alliance, and it’s strange that now as president he doesn’t want to make one,” he added.
He then mentioned that “the issue is how deputies and senators are positioned in this situation. For example, Luís Juez stated that he is faithful to his beliefs and will not follow Macri’s line,” and that “it remains to be seen what would happen if all senators from the bloc took a stand.”
“Evidently, Milei acts differently on various occasions. With the issue of income tax, it is very clear; he voted in favor of the tax cut as a deputy. In politics, anything can happen,” he added.
The Situation of Economic Activity
Turning to financial matters, Banga highlighted economic activities: “This week, the monthly economic activity estimator was released, showing the state of the economy.
Analyzing various activities, all are in decline. The general level of activity fell by almost 4 percent. With an annual growth of almost 82 percent in agriculture, the primary sector, compared to the previous year. Despite this, activity is still declining.”
“Hotels and restaurants fell by 7.1 percent, real estate and rental activities by 4.1 percent; financial intermediation by 10.5 percent; construction by nearly 24 percent, wholesale and retail trade by 18.6 percent; and manufacturing, which is a significant sector, by 20.4 percent. This indicates that the economy is completely destroyed,” he detailed.
At the same time, he explained that “supermarkets are holding onto dollars because they know there will be a devaluation. Javier Milei will face a difficult situation for the rest of the year as there will be no exit from the currency controls.”
The Uncertainty in Government
In line with this, the specialist emphasized the dilemma the government will face with devaluation: “90 percent of commentators already know that the currency controls will not be lifted and that the measure will not be removed this year, no matter how much they want it. The problem is the tension with that non-removal and how long the market will hold because if financial dollars start to spike and a constant gap emerges between the official dollar and the different dollars, I don’t know how long the government could withstand without devaluing.”
“I really don’t know if it could hold up much longer against the market’s pressure. When a devaluation occurs, those who have dollars will be relieved. That’s the battle Milei faces, and another is fiscal. Milei says he will veto the pension reform because fiscal balance is non-negotiable,” he elaborated.
In closing the first segment, he indicated that “pensions are paid by all the inhabitants of Argentina because there is a law that establishes that workers contribute to their pensions through their salaries,” and that “this leads us to the dilemma of what happens with workers.”
“It now seems that the government will freeze salary increases and set a cap of 2 percent, meaning that any wage negotiations cannot exceed that number,” he concluded.
Darío Banga and the Warning About the Decline in Economic Activities
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