Tuesday
September 30, 2014
Sunday, January 12, 2014

Inflation & market blues in a sultry week

Cabinet Chief Jorge Capitanich said on Tuesday that the Kirchnerite administration was going to submit a bill to change the personal wealth tax but, hours later, Economy Minister Axel Kicillof rejected that possibility.
By Mempo Giardinelli
For the Herald
Economic problems and controversies between CFK’s economic team hit the headlines these days

As a heat wave once again engulfs the national territory and although a summer in full swing already promises to be one of the best in many years for retailers, hoteliers and the tourism sector of this country blessed with so many possibilities, the attacks against the economy have not let up. The small, clandestine and powerful illegal market has aimed to send the dollar up to 11 pesos, and of course it has been successful.

Correctly identified as “illegal and marginal” by the Cabinet chief, “the market” remains a threat, to the solace of a gang of economists that always predict horrors that never occur.

The role that this dozen - or perhaps more - of the most renowned and constantly consulted economists of the so-called porteño establishment plays is quite curious. Each one of them at some time failed utterly as a member of a government in the last 20 years, and there are plenty who have been indicted or are at this moment being indicted. Nonetheless, like an infallible platoon in an idiotic war, all of them are invited daily to television programmes and/or write in newspapers and magazines as prophets of the economic-financial disaster that never materializes. If it weren’t pathetic and grotesque, it would be hilarious that a good chunk of the press continues asking them -and precisely this group - for formulas to “overcome the crisis.”

One of the Argentine economy’s central problems, of course, is inflation. Nobody denies it, or perhaps only the government does, which avoids recognizing it and endures it silently with measures that are not always effective, such as price agreements and the threats to open up imports. Strategies, it must be recognized, that have never worked in Argentina for a simple reason that our politicians don’t want to see: for any measure to work and to be at least minimally successful, effective and well-oiled control mechanisms are required. And they don’t exist in this country. In any area, in any official activity.

Eventually those governing and those seeking to govern will come to that realization: that all good state management depends in large part on the development and implementation of consistent and permanent control mechanisms, which also carry rigorous and effective sanctions. None of that is in effect here. In none of the republic’s three branches nor in any of the 24 federal entities.

And so inflation becomes the national government’s karma, as it was in every government, when the inflation was hyper and the chaos that the military left behind was absolute. Each administration has had to deal with the same tenacious enemy: speculation over the illegal dollar. And above all, with the middle-class obsession for accumulating earnings and savings in dollars, which has lead to some jokes such as one that says that inflation in Argentina is no longer an economic problem, but a psychiatric one.

Of course the summer has been one of the best for the tourism sector in years, decades even, thanks to at least two factors: weather and the extremely high cost of tourism abroad. But that isn’t enough to disregard the alarm bells.

Among the summer’s fireworks, magnified by the opposition press, was the brief interlude that some chose to see over the intersection of opinions between Capitanich, Echegaray and Kicillof concerning possible modifications in the personal wealth tax regime. It wasn’t a big deal but for a few hours it delighted the major papers, maybe because everything these days is ephemeral and dissolves like sand between the fingers and there is an ostensible lack of predominant issues.

Therefore, as far as unorthodox matters go, it was surprising that the London-based Daily Telegraph invited its readers to give their opinion on whether the Malvinas — Falkland Islands should fall under Argentine, British or shared sovereignty. 64 percent of over 15,000 readers voted for the first option.

It will be argued that it’s not much for a nation to be excited about, and it’s true, but so much the better for it. That would appear to be the hallmark of a normal country that goes on vacation en masse, that has amazing levels of consumption as evidenced daily in nearly all of the provincial capitals, and that thanks to small groups of idiots is prone to weekly overheating over the dollar and other trifles, so as to demonstrate to itself that it knows very well how to self-inflict some damage.

At the same time the major papers compensate the dearth of information with an excess of sensationalist articles and sports news. A killer lightning bolt in Villa Gesell, robberies of well-off families or mothers that torture and kill their children occupy a great deal of space. It is strange how certain members of the press that were respectable in days gone by have taken on the colour of a chronic hepatitis patient.

With regard to meaningless sports news, the comings and goings of Boca, River, Racing or San Lorenzo are treated as important matters while the insanity of the Dakar Rally continues, no longer run in Africa but in this Southern Cone and producing several absurd deaths every year. Common sense suggests that it shouldn’t be run, but business is business, et cetera, et cetera.

In this context however, an idea appeared this week: the Lower House Speaker, Julián Domínguez, proposed reopening the old matter of moving the capital to the interior of the country, in this case to the north. The idea has re-emerged following the failed dreams of Raúl Alfonsín and the Radical Party of moving to capital to Viedma, Río Negro. Like every two or three decades in Argentina’s history since Buenos Aires City was declared the national capital in 1880, cities in Santa Fe and Córdoba have been proposed as alternatives multiple times for geographic reasons.

The arguments, although well known, nonetheless open up a debate. Domínguez argues that “countries with ambitions don’t have their capitals in ports,” forgetting that London, Lisbon, Amsterdam, Hamburg, Washington and Tokyo, which all hosted empires in their day, were port-capitals. But he is correct nonetheless when he proposes that the capital not be a part of “the logic of this city, which is wonderful and captivating, but which is based on what happens in this city, not which happens in the entire country.” An issue, which should it be followed up on, would air out this country’s intensely toxic political debate.

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