At first sight there might seem little remarkable about the heads of the ARCA tax revenue and customs authority and Banco Nación being replaced by the next in the line of succession, rather than any invasion from outside, but these changes carry the processes of involution and institutional disrespect within the Javier Milei administration to new levels. The most glaring anomaly is surely the promotion of DGI tax bureau chief Andrés Vázquez to ARCA head while under investigation for tax evasion – perhaps the only example of a suspected tax dodger becoming top taxman anywhere at any time in the world for all we know. Yet there are other less obvious and perhaps deeper irregularities about these appointments.
Both changes find Milei ignoring the advice of both the United States Treasury bailing him out for the midterms and the International Monetary Fund (IMF) to broaden his coalition, instead intensifying the “iron triangle” with his sister, Presidential Chief-of-Staff Karina Milei and star spin doctor Santiago Caputo. The departing heads were almost the last survivors of outreach – Juan Pazo was ARCA chief (nominally with Vázquez already in charge) due to his proximity to Economy Minister Luis Caputo, because of their previous shared experience in the PRO centre-right party and the Mauricio Macri presidency, rather than any libertarian links, while Daniel Tillard had been given Banco Nación as one of a trio of recruits from the fiscally responsible Córdoba provincial government along with ANSES social security administration chief Osvaldo Giordano and Transport Secretary Franco Mogetta (Giordano long gone and Mogetta out last May).
The two new heads are seen as maintaining or even restoring symmetry in the “iron triangle” with Vázquez linked to Santiago Caputo and his continuing control of the SIDE intelligence services, while the new Banco Nación president Darío Wassermann is even closer to Karina Milei as the husband of Pilar Ramírez – the libertarian party strategist’s main spearhead in this city (especially with Manuel Adorni now Cabinet chief). Yet Santiago Caputo is not the only mentor of Vázquez – another sponsor is the controversial businessman Leonardo Scatturice, who only this week acquired OCA couriers to add to last June’s purchase of Flybondi low cost airline. Since the long-insolvent OCA has tax arrears running in the hundreds of millions of dollars, Vázquez thus faces an early conflict of interest which he can perhaps delegate to his replacement at the DGI – his associate Mariano Mengochea, a figure previously accused of being soft on the Kirchnerite tycoons Lázaro Báez and Cristóbal López.
In restricting government to ever narrower circles, Milei is misreading the results of the last midterms, which he continues seeing as a supreme vindication of his sister’s “purple or nothing” strategy. Yet the province of San Luis (where the libertarian presence in the provincial elections was limited to mavericks with the national party staying clear while the provincial government sat out the national midterms) may be presented as a counter-argument for deals with other parties since La Libertad Avanza won 51 percent of the vote as against 41 percent nationwide. The latter number was a pleasant surprise when measured against previous gloomy expectations but was it really such a great result against such an inept and fragmented opposition? But Milei’s conclusion is that sister knows best.
A broader coalition was one recommendation of the US Treasury and the IMF – another was a raft of structural modernisation generally identified as the trio of labour, tax and pension reforms. The labour reform bill entered the Senate at the committee stage in midweek but pension reform has been postponed to the eventuality of a second Milei term and now the prospect of tax reform is starting to recede just at the time of changes in the helm. This has probably less to do with Vázquez than Milei and Economy Minister Caputo, who are discovering that the price of a sacrosanct fiscal surplus is keeping the tax burden relatively high even after the “chainsaw” – the minister might permit himself the odd tweak (like trimming grain export duties by one or two percent earlier this month) if the ink stays black but no systematic tax reform or major cuts.
This patchy approach to structural reform is simply not good enough for Argentine industry – the Chinese imports are entering now while the structural reforms to lower costs and make local producers competitive are taking forever. Balancing the budget and lowering inflation was good enough to earn Milei a stronger Congress for his second half but the bar has been raised and the need is growth.
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