April 24, 2014
Federico Sturzenegger, PRO lawmakerSunday, December 29, 2013
‘We must focus on credibility, not reserves’
Current position: PRO lawmaker
Previous position: President Ban-
Favourite book: Blindness by
Newspapers: The New York Times
Magazine: The Economist
TV programme: All singing and
talent contests, because that’s
where meritocracy shines.
Newly elected PRO lawmaker Federico Sturzenegger welcomed the Herald to a worn-out, undecorated temporary office in the annex of Congress to discuss his transition into politics and his view on what lies ahead on the economic horizon. Vehemently defending Mauricio Macri’s party as the leaders of a revolution against neopatrimonialism (clientelism), in which state resources are used to ensure the support of clients in the population, Sturzenegger believes Argentina needs to move on from the conservatism of Peronism and Radicalism. The economist recognizes the government has made progress in improving Argentina’s credibility for investment, which he claims is the key to changing a trend of dwindling Central Bank reserves.
Talk to me about your transition to Congress; was it your idea or a request by Macri?
It was fully my idea. Everything in life has a cycle, and I had been Banco Ciudad governor for six years. We had a very successful administration, turning a loss-making public company into a profitable one, but also one with a social focus, such as mortgage credits — never seen before at the Bank. My contact with Congress came with the law on judicial deposits, and when that process was over, I said: “There are things coming out of here that are bad for the country.” That’s I when I noticed my vocation.
What are your initiatives for this coming year?
I divide them into three categories: the obvious, the necessary and those which allow us to dream of a different country. The obvious ones include the INDEC’s independence, adjusting the universal child benefit scheme so it is not diluted by inflation and that fiscal adjustment be a presidential prerogative. The necessary ones include modifying our hydrocarbons law, as the discovery of Vaca Muerta has made us an oil country. In the latter category I include, for example, an equal access to public sector employment law based on merit.
As a caucus with significant presence in Congress now, will the PRO have to seek greater consensus on social issues such as the point of conception?
We work with freedom of conscience on the Civil Code and family issues, but we also have many workshops (in which we can) exchange opinions between caucus members. We’ve reached a clear consensus on issues like the flexibilization of civil matrimony, including the possibility of pre-nuptials and reducing the bureaucracy behind divorce.
What’s your position on same-sex marriage?
I would describe myself as a same-sex fanatic and activist, to the extent that at Banco Ciudad we released an advertisement in homage (to the cause) that featured a lesbian couple. It’s a position that isn’t held by everyone in the party.
On issues like abortion there is no consensus.
There’s a debate regarding the point of conception. I believe that conception occurs when the embryo is implanted in the uterus. Assisted fertilization is a right consecrated by Congress.
Why are reserves no longer falling? Do you think the government’s hike of taxes on spending abroad and luxury goods were effective?
We are against greater tax pressure, and the government is doing so under the guise of resolving an external sector issue. So we suggested reducing a regressive tax, such as IVA. I have consistently said that such a fuss over reserves is unnecessary, because reserves are important only in a country that lacks credibility. We never ask how the United States’ reserves are doing, despite their foreign debt. What does worry me is when the Central Bank issues debt in dollars, paying significant interests, and pushes export firms to settle earlier. Flexibility in the exchange rate market, a reasonable dollar price and most of all credibility will curb the draining of reserves.
Much of the media gives reserves quite some attention.
I’m not obsessed with the issue. Many opposition economists are, we need to focus on credibility. The dollar rate needs to reflect the willingness of exporters and domestic prices. There has been some progress on credibility.
Paying Repsol, for example?
YPF would be an extremely clear case, imposed perhaps by the need to recover investment in the energy sector. Stealing the largest company wasn’t going to work, the government recognized that. It curbed investment or made it secretive, as was seen with Chevron. The clauses in the contract were not made public, probably because the terms they had to offer in this context of legal stability were so poor. Publishing the new CPI in February will be another step forward that will change the trend of systematic lying. But we will see how solid they end up being. Reducing the gap between the official and blue dollars is also important to attract investment, but I see no progress whatsoever on inflation.
Are there keys to lower inflation?
We all know that inflation is caused by printing money. The revenue gained by the government when it prints money and the inflation it causes is a tax on the wages of Argentines.
Do you envision a more pragmatic allocation of subsidies, and if so, will this affect economic activity?
We haven’t seen significative changes. Today Argentines pay for energy. The government has chosen to spend on subsidizing energy for Buenos Aires province, which is paid for by the rest of the country. I made a statement that was regarded as controversial recently that Argentina has no budget deficit. People asked me: “How? If more spent than collected.” Inflation covers that difference. It was different in the 1990s when the deficit was financed with debt, which is kicking the problem forward. Inflation is as if the VAT tax had been raised six points. The government will find a very constructive approach in the PRO when it comes to debating the budget and creating a better balance between spending and taxes.
Some improvisation is evident in the capital’s public transport — individual vehicle access is restricted and parking meters are installed before a minimum level of infrastructure is guaranteed.
If there’s something there hasn’t been improvisation in, it’s transport. There’s a clear policy that is the fight against private cars and for public transport. Previous mayors only improved infrastructure for cars. In the south there are people who cannot buy cars, but they can a bicycle, and there are now bike lanes. The metrobus, the subway, are other examples. If you go to a developed city, you will see less individual cars and more public transport.
But people still travel in poor conditions. Isn’t restricting access creating excessive pressure on existing infrastructure?
Well, they increasingly travel better. The Avenida 9 de Julio metrobus is saving people 100,000 hours per day, or 25 million per year. Public transport generates its demand. This allowed us to pedestrianize parts of the downtown area. It’s true that we don’t have an ally when it comes to the railway system. The Sarmiento line carries half as many people as it did in 1998 and most lines increasingly run slower.
Is the Metrobus a priority over adding subway stations and carriages?
I’d say they are complementary. The Metrobus requires much lower investment than the subway, and that’s why it has been implemented in so many cities in the world.
Couldn’t the four million pesos to bring Usain Bolt to run against the Metrobus have been used for something more productive?
You always ask yourself how effective advertising and marketing is as part of your budget, it happened to me at Banco Ciudad. That’s more a question for the marketing experts.
Do you think CFK’s new approach to dialogue with Macri means she has picked him out as Kirchnerism’s rival for 2015 because he is a more polarized figure than say, Massa, and thereby more accessible?
Closing herself off did not work for her, electorally speaking. People rejected confrontation as a way of conducting politics. In 2015, we are going outside the structure of Peronism and Radicalism, which Macri has already confirmed. The most challenging thing for government in Argentina is to serve the public. The public sphere remains controlled by private interests of different shapes and forms. The PRO will show that it manages public resources extremely well. For instance, building the Metrobus with the money lost by Aerolíneas Argentinas in 20 days. This is why I say the PRO is revolution and Peronism is conservative. It’s a group of very capable people, which in one decade is Menemite-Liberal and the next Kirchnerite-Chavista, which is only coherent in using that structure of power to sustain clientelism (neopatrimonialism).
But the party clearly needs an alliance to complement its current structure, does it not?
I don’t think so. The last election was very successful. We always give the election of Graciela Fernández Mejide as an example, a French teacher in the City who beat “Chiche” Duhalde despite her backing from the Duhaldite apparatus. When people want change, structures weigh a lot less. Plus the City government has a very positive image, and even more so among the residents of the provinces of the interior.