The Argentine Budget Association (ASAP), an entity founded 46 years ago and made up of qualified specialists in the analysis of public accounts, has just stated it without hesitation. It has said that, compared to the same period in 2023, the drop in capital spending in the first quarter of 2024 “presents levels of almost total stoppage of public investment.”
It is about the serve of the 83,4% real, discounting inflation, which the Ministry of Economy added to the State funds that are destined, above all, to infrastructure works in land, rail and air transportation and housing and basic social services. The “almost”, in case it needs to be clarified, is the difference between 83.4% and 100% complete.
Translated into silver, the measure represented a fiscal “savings” of $124.7 billion, That is, just over a quarter of the cut of $597,000 million in retirements and pensions that, during the same four-month period, implied the decision to apply the pension mobility inherited from Kirchnerism. The issue this time is not about the fiscal squeeze, which abounds, but about the How far does the squeeze go?
Hitting public investment and hitting it from the start is here a classic of the adjustments of all times and all governments, an obvious move considering that the political return of the works is collected when they have been completed while the cost can be short-term, if it takes the form, for example, of a salary cut. The way out would have been for someone to imagine a slightly more elaborate variant.
It is known, however, that Retirees are not in a position to organize large protests or loud mobilizations. and if they speak on election days, as they speak with their votes, the next ones are a long year away: they are the legislative elections of December 2025.
Just to add a misfortune of this time to the general picture, we have that between November 2023 and March 2024, in just four months, the purchasing power of the minimum retirement fell by 21.5%. Or 16.1% with the extra bonuses incorporated.
The point is that public investment does not represent a harmless alternative but, always, a bet on the growth and productivity of the economy, on generally well-paid employment, on progress and quality of life and, if you like, on balance. social. Subsequently, it can serve to narrow the competitiveness gap with countries that invest in activities that are neglected here, that age and fall behind.
Anyone can notice without much effort the enormous, growing deterioration faced by the infrastructure in Argentina and, in addition, the quality of the services provided by the State.
It is clear in their decisions the role that libertarians assign to the State and not only to the economic State, although it is understood that someone will do what the State fails to do and that they will obviously charge for that work. The officials who administer the State operate in the middle.
A series that appears on the Ministry of Economy’s spreadsheets reveals that we are, finally, facing a process that came before.
Calculated as a percentage of GDP, Argentine public investment was 1.3% in 2023; 1.4% in 2022, 1.1% in 2020 due to the pandemic and 2% in 2019. Only in one of the last five years did the country exceed the very modest 2% of GDP: in 2021, when Under pressure, arrears were paid to suppliers.
Nearby, in the neighborhood, we have considerable contrast and a different way of interpreting economic processes. Data from Latin America show that entering the year 2000, the average public investment in the region oscillated around 2.6%, 2.9 and 3.9% of GDP, that is, generally above 2%. .
Much further away, in the world of Southeast Asian countries, the average is 7%. Along the same lines, figures released by analysts from the Monetary Fund say that between 2013 and 2015, public investment exceeded 7% of GDP in 30% of developed countries. And others consider 4-5% a reasonable level.
It is clear that this is not the path that the Government has chosen. Javier Milei and his Minister of Economy, Luis Caputo, They have all their chips on an aggressive, accelerated, sometimes extreme and definitely pro-market fiscal adjustment. It is intended, thus, to be a demonstration of firmness and commitment to his ideas.
Devoid of content clearly associated with the real economy, the model fits well with a description widely spread in the financial world: “Argentina is a short-term business,” he says. It could also be said that it is a country where there is never a shortage of bicycles or where there are often plenty of bicycles and experienced cyclists.
All very attractive for opportunity seekers, but risky when the activities on which one has bet fall. And here we have, among several others, two of the big and important ones that are really having a hard time.
One is nothing less than manufacturing industry, which accumulates nine consecutive months down the ravine and three of them with truly raised reds: 12.9% in December 2023 and 12.2% and 9.9% in January and February 24.
In the same bulletin there appear other negative records that are equally strong or stronger than those, such as the 48.3% drop in the production of agricultural machinery; 39.7% fell to the steel industry and 17.7% to automotive activity.
What’s next on the menu is not out of place either: it says that between October 2013 and October 2023, 68,573 registered jobs were lost in the industry. Today the workforce amounts to 1.2 billion jobs.
Now, the turn of the construction. Between February 23 and February 24, activity recorded a drop of 24.6% after a drop of 21.8 in January and another of 12.2% in December. Quantity numbers also appear on the materials shelves and all in bright red, such as 64.9% asphalt, 45.9% in iron and steel or 34.8% in concrete.
And so that the drowsiness does not ease, we have a couple more figures, none of them too encouraging as they should be. One reports that formal employment in the sector reached 396,287 workers in December 2023 and thus was below the 400,000 barrier after 17 consecutive months of moving above that mark.
The figure that follows reveals that the manufacturing industry and construction together account for 20% of the Gross Domestic Product. And if we add wholesale and retail trade, which started 2024 with a drop of 8.2% and represents 13.3% of GDP, we have 33% of the economy in recession.
All specialist analyzes aim to detect when the economy will begin to recover. There is an alternative: knowing when it will stop falling.