Tuesday, May 28, 2024

ECONOMY | 06-07-2022 23:00

Inflation, export duties and IMF: Silvina Batakis’ economic definitions

Martín Guzmán’s successor considers that the escalation of prices is a multi-causal phenomenon and defends strong state regulation of the economy. For her, “wages must run ahead of inflation.”

For Silvina Batakis there is no such thing as “dignified” poverty. Argentina’s new economy minister has that idea fixed in her head and puts it clearly on her Twitter account, where she assures that the phenomenon must be fought “with a state which plans and intervenes.” 

Batakis, 53, is confident that in order to lower inflation, it is necessary to diversify the country’s productive structure, that wages must be higher than prices and that fuel prices must be regulated.

Martín Guzmán’s successor presents, a priori, ideological differences regarding the economic management of the country.

"Wages must run ahead of inflation. That is one of the motors of the economy, not just  ideology," maintained the new minister in 2018 when she gave an in-depth interview to Perfil that clarified her thinking on the economy and other topical issues.

Argentina faced a strong run on the currency during the last days of Guzmán’s tenure at the Economy Ministry and the turbulence has not stopped.

In this respect Batakis believes that capital controls “are suggested even by the IMF” but “should take the form of trying to lower the pressure on the exchange rate in the area of tourism; there should be a differential exchange rate for other sectors and also more import controls.” This last point was pressed firmly by Vice-President Cristina Fernández de Kirchner in her recent Flag Day speech.


Batakis on inflation

The new economy minister held the same position at provincial level when Daniel Scioli, the current production minister, governed Buenos Aires Province. 

Her record then is generally remembered positively but not without its inconveniences. One was in mid-2012 when there were complications paying salaries and the mid-year aguinaldo bonus and the national government – led by then-president Fernández de Kirchner – had to send a multi-billion aid package to La Plata, though not before scolding the province in a nationwide broadcast.

By that time inflation was already a daily concept in the country.

“It is a phenomenon which we combat seriously with the approach of diversifying the productive structure and in Argentina that must be done,” said Batakis some time back.

The “diversification” proposed by the woman who served as provinces secretary in the Interior Ministry until last weekend contemplates “the pampas, which are the most fertile zone in the world and highly profitable in a way which industry cannot naturally be.”

Convinced that inflation is a multi-causal phenomenon, she believes, on the contrary, that the idea of it being in reality a monetary process is “absolute myopia.”


Fiscal deficit

While the idea of lowering the fiscal deficit is professed by the economic discourse of the opposition, along the lines of the agreement with the International Monetary Fund (which Batakis will now have to handle), the new minister believes that it is a “manageable” variable at levels between two and five percent of gross domestic product.

“They [the opposition] use the deficit as a problem but it’s not so different from other countries,” she said previously. 

“It is better to have twin surpluses, which only happened with [former president] Néstor Kirchner, but the ideal is not possible. When they lay emphasis on public spending, they seek to hide their earnings so that there are not more controls and hence more profits," she concluded.


Export duties, the IMF and public service pricing

For the new minister, the first thing to understand when talking about export duties is that “they are not an Argentine invention – they exist in hundreds of countries.”

“When they took away the export duties on maize, the prices of chicken and pork shot up. That’s mathematical. The farmer, when he bought maize until the end of 2015,  knew that the international price was X but in Argentina it was X minus export duties but removing the levy made it X again. In other words, the export duties were containing inflation. That’s called economic policy.” 

With that example,  Batakis has stated her position in favour of that element of economic policy.

Regarding the agreement with the IMF, the new minister underlined some time ago that the first deal with multilateral lender was signed in 1956 and is already international because it “has no exit clause, not so the economic programmes imposed.”

“The debt will be returned in the medium and long term,” she affirmed.

Three years ago Batakis participated in the authorship of the book Radiografía de la provincia de Buenos Aires. Crisis de un territorio en disputa. In it she maintained, among other things, that the austerity and opening the way to financial capital during the Mauricio Macri Presidency was felt with particular force in Buenos Aires Province. That, she explained, was because the ex-governor María Eugenia Vidal “incorporated accelerated indebtedness as a central element of provincial economic policy.”

On the energy front, the new minister also believes that the regulation of fuel prices is necessary and even more that energy services like electricity and gas should be “totally nationalised.”

Speaking during the Macri government, Batakis recognised that “there were errors in the systems of public servicing pricing” under Kirchnerism. Nevertheless, “what they [the Macri administration] have done now is terrible (...) the new contracts have given the companies a free ride.”


Support at a critical moment

During last weekend’s negotiations to define the name of the new minister, much of the speculation centred on the need for a profile with strong political support.

Up to now Batakis would seem to comply with that point – several officials and leaders responding to President Alberto Fernández and Kirchnerismo alike celebrated her arrival. To that may be added the approval of Peronist governors, though it remains to be seen how business leaders react.

"Batakis is an excellent economist whose work in Buenos Aires Province was brilliant, above all in times when complications arose with the results plain to see," said Security Minister Aníbal Fernández on Monday morning. 

"She’s a woman whom I’ve known for some time, an economist of great excellence and obviously in the course of this afternoon she will be taking charge of the Economy Ministry," said Cabinet Chief Juan Manzur a little earlier.

Chaco Province Governor Jorge Capitanich, one of the leaders of the so-called "league of governors" also celebrated the arrival of Batakis: "Our best wishes for her ministry. Her female sensitivity and the conviction of her thinking, an optimal  combination for these challenging times." 


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