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He Million in 2009 Fiscal Deficit

By Ramiro Castiñeira

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Last week the Government announced that the fiscal outcome in November reached a primary surplus of $ 2.802 million, even without considering the income from the SDR of the IMF, the fiscal outcome would lead to a primary deficit of $ 1,200 million in the period.

Moreover, the deterioration of public accounts will double if not considering the $ 1,100 million monthly contributions from the former Pension Funds.

Similarly, comparing the first 11 months reflects the total public sector revenue increased by 13% over the same period last year. Even subtracting the proceeds of the SDR's as the former Pension Funds, tax revenues would have increased only 4.7% compared to 2008, remaining in positive territory just because of inflation.

Needless to say, it could hardly sustain the fiscal surplus in a year when tax revenues fall to a local and international economic recession, coupled with a poor harvest. That is beyond discussion. In fact, just trying to do so would be counterproductive.

But it warned that the government lost most of the fiscal surplus (3% of GDP in 2008), more by increasing public spending by lower tax revenues. Increased public expenditure was 29% for the full year, a magnitude that is almost twice the estimated inflation for the period.

While it may be understood as a countercyclical policy to mitigate the deterioration of economic activity, so is that the pace of public spending can not be sustained over time. Something that becomes worrisome when even clear warning signs of economic rebound international and local public spending in November rose 37% year-magnitude well above the annual average, making it clear that does not stop his drive on the level of activity.

Although the Government no longer has the resources to ensure payment of public debt in time with full independence of the financial markets, the default scenario is not yet on the horizon as the government needs only 2.3% of GDP for the payment of interest and principal in 2010 ( intra net public sector debt), of which half are in pesos and the rest have hefty reserves.

Now if the Government is set to restore the fiscal surplus target, the situation is moving well financed with more debt (as in the '70s and '90s), or to fund the State inflation, as in previous decades. Two hundred years of history showed that in both cases never ending.

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The "Fund Bicentennial "does not jeopardize the Currency. The fiscal deficit itself.

By Ramiro Castiñeira

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Only a handful of countries have achieved currency without backing of foreign assets. Extreme example of this is U.S. with a currency backed solely by their own government debt. For other countries, mainly for emerging, so that society can gain confidence in its currency, the Central Bank needs to show not only that has a floor of foreign assets to support it, but it will not finance the commitment to free government.

There is no "rule" to know which is the optimal level of foreign assets to generate confidence in the currency. While the rule of "free reserves" or convertibility own time, are examples of trying to establish that floor, history shows that this does not guarantee the value of the currency. It may support the monetary base, something radically different to support the currency, or the broader monetary aggregates.

This reflects that the deterioration or strength of a currency does not come from the stocks that support, but by flows of the economy.

For example, economic science is evidence that a persistent surplus in the current account of balance of payments (flows) to build pressure for currency appreciation, regardless of the stock of reserves available to the Central Bank. Conversely, the deficit will act to push for a depreciation of the currency.

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Similarly, monetizing it is known that chronic fiscal deficit, ie red issued to finance the Treasury (flow), to build pressure for a devaluation of local currency, with the most money in circulation and the same generation value.

Warned of this, money is not put at risk by the creation of the Bicentennial Fund, but for the loss of government's fiscal surplus in a context where no access to credit in sufficient quantity and price to be independent of BCRA.

Pay the maturity of public debt with reserves virtually unaccountable interest before maturity to refinance an interest rate above 10% per year, not a bad decision financially if seeks to leverage the international situation of zero interest rates. The National State as a whole will save u $ s650 million annually in interest on a net basis (= 6500 * 0.10), without changing his assets (liabilities canceled Debt-to-asset-stocks-).

Now it is a fact that the Government and no income to cover their operating expenses, which has financed using Central Bank reserves, not only to pay down debt, but also to finance current operations. That's where the risks lie ahead.

with stock finance current expenditure (whether qualified as now, or selling as the Convertibility YPF) are short-term solutions that do not address the underlying problem is in deficit, the true source of impairment value of the currency.

Do I Need A Ski Jacket?

RC and career profile

Yesterday I ran the 6 th edition of the San Silvestre de Cercedilla. A classic! This year there was snow, but because the ice had to remove a couple of kilometers, which meant that the race had a distance of about 12 km approximately. Great atmosphere, very cold (below zero at the start) but like every year, great. My data

this year 178 1577 of participants, with a time of 1:00:49 making about 5:18 min / km . What is clear is that next year, repeat.

Entering goal.

Ratings: runners in and local

How To Clean A Flat Top Grill Without Chemicals

GESA wishes

Red Itchy Swollen Eye Feels Stingy

Social and Fiscal Impact of New Family Allowance

Monthly Report - December 2009 (PDF version).

"The Fiscal and Social Impact of New Family Allowance"

By Ramiro Castiñeira

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own initiative or an advance on the agenda of the opposition, the fact is that the Government announced the plan for "Universal Family Allowances." The measure seeks to extend the benefit of the family allowance the State seeks to all registered workers, workers now also working in the informal economy or unemployed.

family currently has a maximum allocation of $ 180 per month for each child under 18 by the worker. The system covers 4.3 million children, at an annual cost close to $ 10,000 million, equivalent to 0.8% of GDP. However, the population under 18 years in Argentina more than 12.4 million, which implies that the current social security system covers only 35% of age group.

The remaining 65% (equivalent to 8.1 million children) do not enter the benefit either because their parents working in the informal economy or are unemployed, or at the other end and being at least, do not access for being registered by workers with salaries over $ 4,800. Neither access when not under dependency ratio be monotributistas, self, professional, and pattern.

In this universe of 8.1 million children, it is clear that the government established new requirements for targeting the household allowance only to the most vulnerable children. With this aim requires a certificate attesting that the child is current with the national vaccination schedule and for more than five years of age also require a certificate of regular attendance at public educational establishments. But even meeting these requirements only Parents will have access to working in the informal economy, have incomes below the minimum wage.

demands tend to focus assistance to poor households while granting financial incentives for health care and education of children in vulnerable households. But the truth is that it also carries a horizontal discrimination because the worker does not operate such registration requirements, while the monthly income ceiling to qualify for the benefit is more than three times the minimum wage.

In sum, there is now a social consensus on the need to give a response from the State children under 18. But the differences are minor and do not as a support point to a universally without any condition, while others point to grant a subsidy to enable more targeted to attend only the most vulnerable children, noting the presence of a budget constraint in the State.

This report aims to deepen the analysis. To do this, we first present a picture of the situation in Argentina social structure. Then continue with an analysis of current social assistance programs that have state the explicit goal of alleviating poverty in households with children. Finally, there will be a analysis of the recent program launched by the Government, as also estimate the number of households and children who are favored by the new universal allocation, as well as their fiscal cost and form of financing.

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Climate Change. The meeting in Copenhagen

Special Report No. 408 (PDF Version)


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"Climate Change. The UN meeting in Copenhagen and the challenges for Argentina"

For Alieto Guadagni