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Guest post by Dr. Nazareno Etchepare

Demos’ economic team, led by Dr. Nazareno Etchepare and Dr. Martin Gramont Manzo, President and Chief Economist respectively, analyzed the current Argentine situation. 

The Argentine economic situation is getting more difficult overtime. In this context, the economic team of DEMOS defined the current domestic economy as “a hell”, and it was compared with the circles of the “Divina Commedia” of Dante Alighieri. 

“In Argentina, the economy is -since too long ago- a hell; and it seems that also is a circle, as big errors and mismanagement of economic policy -and ulterior macroeconomic disequilibria- are being repeated year after year, decade after decade” indicated DEMOS in its official press release. 

The DEMOS economic team held a meeting in which participated Dr. Nazareno Etchepare and Dr. Martin Gramont Manzo, who presented an analysis of situation.

Etchepare stated that “what is ignored, and it has been ignored since several Administrations back, is that the Argentine economy needs major surgery to get back to a path of growth, and without this there is no new minister or foreign credit capable of making things better. Effectively, from a strict economic viewpoint, are needed structural changes, to revert years of economic policy malpractice which resulted in more poverty, recession, lack of investments, collapsed infrastructure, commercial and financial isolation from the world, and serious disequilibria and distortions, as an annual inflation of three digits. As a result, the economic body presents serious damage in both aspects, namely tangible (capital accumulation, productivity, infrastructure and technology) and not tangible (credibility, profitability, confidence level)”.

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Gramont, in turn, explained: “Argentina faces a severe stagflation, that is, high inflation with stagnation, along with other disequilibria like fiscal deficit, stagnated investment, explosive quasi-fiscal debt from the Central Bank (remunerated liabilities), rachitic exports, and other macroeconomic pathologies. Economic theory and empiric evidence show us that stagflations are solved with contractive monetary policy (basically by stopping monetizing fiscal deficits) and expansive fiscal policy (which in the Argentine case is not increasing public expenditures but aggressively cutting taxes)”.  

Some conclusions of the meeting were the following:

• Argentina is still one of the top human capital places in LatAm with the potentiality for producing food for more than 300 MM people. 
• The country is well positioned to start trading with the world, exporting knowledge-based services.
• Additionally, the potentiality exists of becoming a country self-sustainable in energy based on a diversified energy matrix.
• In order to start walking this path, Argentina urgently needs: I. A stabilization plan to eliminate fiscal dominance reducing inflation, along with a monetary reform under a monetary rule; II. A public sector reform to cut corruption, leaks in resources and oversizing; III. A labor reform to facilitate a (more) flexible labor market dynamizing job market; IV. A tax reform to cut, reduce, and simplify the whole tax structure;  and, finally, V. A geopolitical U-turn to realig the country with the West and other states in line with democratic values under the rule of law, and no with rogue-states.

Nazareno Etchepare is an attorney and political analyst in Argentina

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