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December 20, 2014

District improves budget figures, but is still unable to invest in capital expenditures

Wednesday, July 2, 2014

In focus: BA province getting trapped in the day-to-day

By Federico Poore
Herald Staff
Buenos Aires province is getting its budget into shape, although the district is still heavily dependent on federal aid and unable to make significant capital expenditures.

Such is the scenario for the country’s biggest province, according to a report analyzing the implementation of the 2013 budget published last week by the non-profit Argentine Association of Budget and Public Finance Administration (ASAP).

The financial standing of the province led by Governor Daniel Scioli has improved from 2012, as last year’s economic balances show a surplus of 232 million pesos, compared to a 7.904 billion deficit from the year before. The province successfully turned a $6.422 billion primary budget deficit into a $1.532 billion surplus by keeping revenues greater than expenditures.

But at the same time, 29.4 percent of government revenue comes from federal transfers — most of it from revenue-sharing and federal education funds.

“The financial structure of the province depends heavily on the evolution of federal income and a number of provincial taxes tied directly to economic activity” such as income and sales taxes, the Fiscal Analysis department of ASAP said in last week’s report.

Winners and losers

Almost half of the district’s total budget goes to salaries, while transfers to local government accounted for 22 percent of government expenditures. Another 19 percent goes to Social Security.

These three aspects “reflect the stiffness of BA province’s total budget,” ASAP stressed.

A finer analysis of last year’s expenditures reveal groups of “winners” and “losers” in terms of budget allocation and indicates the priorities of the Scioli administration.

In 2013, the provincial government destined more than 2.119 billion pesos to Transport (78.8 percent more than the previous year). A relevant development in that department were the works on Provincial Route 6 that connects the provincial city of Zárate with the Ángel Etcheverry district located near the province’s capital, La Plata. (The government destined 429 million pesos to these works).

Government administration received 36.4 percent more funds than in 2012 — a total 34.260 nillion pesos. Other departments were less lucky. Only 751 million pesos (out of a 151,081 illion-peso budget) were allocated to housing projects — a 9.9 percent hike from 2012 which does not compensate for high annual inflation rates, which private estimates place between 7 to 28 percent.

Financial help for sporting programmes — one of the flagships of the current administration — also ended up in the losing column, which a mere 0.2 percent hike compared to the previous year.

However, the greatest budget cut was in the environment department. The province’s Sustainable Development Organization (OPDS) and other related secretariats received 23.6 percent less than a year before, ASAP revealed.

Like there’s no tomorrow

But there’s another way to look at the district’s tight budget: the lack of a long-term investment strategy.

To prove its point, ASAP compared capital spending as a percentage of total expenditures in BA province to the average percentage of capital spending in Santa Fe.

The result? While Santa Fe managed to shift some government spending from current to capital spending (4.6 percent in 2012 to 5.6 percent a year later), BA province showed a decrease in capital expenditures, at least in terms of percentages. In other words, the day-to-day tasks of running the province is not allowing the government to think in the long term.

@fedebillie

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