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Legislative agenda and economy 2021: debt, recovery and elections

After a year crossed by the pandemic, which re-established priorities on the national agenda, the political and economic dispute will have several battle fronts in 2021.

The legislative agenda will be one of them, not only for the midterm elections but also for various projects on the economic agenda that must go through Congress.

To the polls

Although it is not yet defined what will happen with the Primary, Open, Simultaneous and Mandatory elections (PASO), the truth is that in this year’s elections half of the seats in Deputies (127 seats) and a third of the Senate are renewed (24 benches).

After a very good election in 2017, Juntos por el Cambio is the political space that most deputies have to renew in the lower house (60 of the 116 it has), followed by the Frente de Todos, which renew 51 of the 119 current.

If there is a positive election for the ruling party, it could reach the 129 seats required for its own quorum in this Chamber, since the Government required political alliances throughout the past year to achieve that number.

In the case of the Senate, the bet of the Frente de Todos is to maintain its own majority. The ruling party renews 15 of its 43 seats and Together for Change will do the same with 9 of the 29 it has.

Although in electoral years not as many sessions as those of the 2020 schedule are expected, from the legislative agenda there are several highly relevant economic issues that will be discussed.

Some were included in the extraordinary sessions that are in force until February 28. For example, the Law to Strengthen Debt Sustainability, already approved by Deputies. While other issues were added to the agenda, such as the modification of the Income Tax.

IMF and debt

The Debt Sustainability Strengthening Law establishes that all agreements with the International Monetary Fund (IMF) or external indebtedness with public securities must be approved by Congress.

In this framework, it is known that during this year it will have to be discussed in Parliament the agreement reached with the IMF on the Stand-By loan acquired by the Macri government in 2018.

Said loan, from the moment it was signed, had payment conditions that were impossible for our country to meet.

Of the initial USD57,000 million agreed, Argentina finally received disbursements for USD44,000 million, which were due to be returned from 2021.

This year payments should reach USD5,190 million, with 2022 and 2023 being the years with the highest payment loads, each concentrated around USD 19,300 million.

To measure the weight that these payments would have, it is enough to compare them with our international reserves, which currently stand at USD39,000 million.

It is expected that in the negotiations longer terms will be achieved for the payment of the debt, which, although it means the most sustainable solution in this scenario, will imply more years of interference by the agency in our economic policy.

In fact, the macroeconomic projections of the 2021 Budget were made in view of the renegotiation with the agency.

Budget 2021

In this year’s Budget the projections were conservative.

The fiscal deficit is expected to reach 4.5% of GDP, against 6.5% in 2020, not considering additional items related to the pandemic, such as new rounds of Emergency Family Income (IFE) or Assistance to Work and Production (ATP).

Regarding inflation, 29% is expected as of December, although for the private projections that the Central Bank of the Argentine Republic (BCRA) reports, this number would reach 50%.

And as for growth, the so-called « law of laws » foresees a moderate recovery of 5.5% for this year, after a double-digit drop in 2020.

Regarding the sectors that will drive the economy after the fall of 2020, public works will undoubtedly be one of the pillars.

Already in the Budget for this year, investments of 2.2% of GDP are foreseen as part of the reactivation.

In addition to the investments already budgeted, projects related to public works were included in the agenda of extraordinary sessions of Congress, such as the reactivation of public works for housing and a regime aimed at promoting investments in the construction of private works.

The construction sector has a highly masculinized employment, since 94% of the positions are held by men.

Driving growth from construction without taking other measures relegates the creation of female employment. The opportunity remains in the hands of the State to actively promote the incorporation of more women in this sector.

Regarding the gender agenda, this year it is expected that a comprehensive care law and a project to promote access to formal employment for transvestites, transsexuals and transgender people will be debated in Congress.

Inflation and the dollar

In the fight to lower inflation and reduce the demand for dollars, a bill to implement tax incentive measures stands out, in order to encourage investment in financial instruments issued in national currency.

Additionally, in the hands of the president of the Chamber of Deputies, Sergio Massa, the ruling party presented in recent days a project for the modification of the Income Tax. An issue always raised as part of the electoral agenda, but which is usually postponed due to cash problems.

According to estimates made by the ruling party, it would imply that more than 1.2 million workers (63.4% of the taxpayers reached today) stop paying the tax by raising the non-taxable minimum to $ 150,000 gross. This tribute is one of the most progressive and one of the ones that contributes the most to the collection (more than 20% of the total).

Since last year, among the measures on the agenda to be discussed in Congress, was the comprehensive tax reform for the post-pandemic economy.

This reform, according to the statements of President Alberto Fernández, would have the objective of making the tax structure more progressive. However, renegotiation with the Fund, its usual fiscal deficit reduction conditions, and the electoral year may lead to the postponement of the initiative.

 

* Economist UBA- Parity in the Macro
** Economist UBA- Parity in the Macro