Mr. Minister of Economy, Martín Guzmán, gave a press conference this morning at the Auditorium of said Ministry where he announced the sending to the Congress of the Solidarity and Productive Recovery Bill. The measures included in the package aim at stopping the fall of economy and starting to fix its imbalances, in order to generate greater social equity and solidarity with those who have suffered the most.
“This Bill is the first step to solve the economic and social crisis that Argentina is going through. The measures are part of a comprehensive program to resolve imbalances, redefining priorities and alleviating the situation of those who are most vulnerable, but at the same time, respecting macroeconomic consistency”, said the head of the Ministry of Economy.
During his presentation, Mr. Guzmán explained that the Bill has four central pillars: retirement, taxes, fees and debt. With respect to the first of them, the Minister warned that “in the last four years there was a phenomenal collapse of the social security system” and that “in the only year of the previous government where the economy did grow, growth was not shared with the retirees”.
For this reason, Mr. Minister announced that “we are going to take 180 days to replace the formula that was intended for an economy that was going to take off and sustain high levels of growth with another that has to be reasonable.” In this sense, Guzmán said that “in that period we will protect retirees who are in greater vulnerability with an additional bonus of 5,000 pesos in December and another in January next year for those who perceive the minimum credit, taking precautions so that the scales remain unchanged”.
With regard to tax issues, Mr. Minister recalled that the reform implemented in 2017 “was intended for an economy that was going to grow, but the economy went from a stalemate to a free fall.” In this context, Guzmán pointed out that “we are going to take measures to avoid a deterioration of the macroeconomics and the situation of the population”. “We cannot allow the deficit to grow because we have no way to finance it; if we resorted to monetary issuance to finance it, it would be destabilizing. We are not reckless, but we come to bring responsibility and to reassure the Argentine economy, ” he added.
Along these lines, Mr. Minister affirmed that “we will return to the aliquots of 2015 in the Personal Assets tax and we will also take measures to promote the repatriation of capital; a tax will be imposed to the possession of Argentine financial assets abroad, but there will be a system to encourage capital return”. Also, Guzmán stressed that “we need to recover the savings in our currency and that is why we are eliminating the schedular tax placed on the savings in assets in pesos.”
“We also need to discourage savings in a currency that we do not produce, which are dollars,” said Guzmán, while announcing that “we will impose a tax for an inclusive and supportive Argentina of 30% on the purchase of currencies, where 70% of the amounts collected will be destined to finance social security and the remaining 30% will be used for infrastructure and housing works”.
The Minister also recalled that the previous model failed because it borrowed heavily in foreign currency but did not use those dollars to create productive capacity to cope with foreign debt repayments. “This reality is acknowledged by the IMF, by creditors and by the entire country,” claimed Guzmán.
The head of the Ministry of Economy also stressed that “we propose to initiate a dialogue based on new conditions to modify the withholding scheme, due to the need to obtain stability and to establish new conditions for sustainable economic development.” In this sense, Guzmán said that the Project does not modify withholdings but it does establish new measures to modify its top levels. That way, withholdings to soybeans will rise 3% from 30% to 33%; and in the case of wheat and corn from 12% to 15%. In addition, withholdings imposed on agricultural industry products will be limited to 5%; VAT refund will be provided to the most vulnerable sectors; and a debt regularization plan will be provided for SMEs and non-profit civil entities.
Regarding the rates, Guzmán assured that the scheme proposed by the previous Govenrment “aggravated the situations that had to be resolved and contributed to the productive deterioration that Argentina is experiencing today”. For this reason, he said that “we are proposing a new comprehensive general framework to rethink the scheme, where we will have a maximum period of 180 days to change the public services scheme for another that has an adequate balance between social protection, production and the promotion of investment in energy ”. “During this period, the postponement of the public services rate increases will continue,” he added.
With respect to the fourth pillar, the Bill will empower the National Executive Power to carry out the necessary steps for debt sustainability. In this sense, Guzmán said that “we need debt policies aligned with the objective of economic recovery, defining the paths of primary and commercial results that are consistent with a country that slows down the fall and stands up.” “Standing up generates repayment capacity facing the commitments we assume,” he concluded.