In recent decades, many reforms have been implemented in favor of economic growth, rebalancing public accounts, and price stability. These include the Fiscal Responsibility Act, three pension reforms, labor and taxes, central bank autonomy, a new sanitary framework, and significant privatization.
But we still grow little, accumulate public debt, and rely on stratospheric interest rates to keep inflation down. What did I do wrong?
The problem is that the three countries have produced a great deal of counter-reform.
This is the case with the weakening of state-owned enterprise laws that allowed the STF to appoint politicians to manage companies. Alternatively, restoring free attorney fees in labor cases would encourage opportunistic litigation and burden companies and courts.
The reduction in loan subsidies from public banks that accompanied the creation of TLP in 2017 is being undermined by new subsidies created by the government.
The successful relaxation of local content requirements in some public policies (oil tenders, subsidized public credits) increased public revenue and competition, and also reversed increased investment.
Fiscal savings from social security reform are being thrown away by the administration’s approval of real increases in basic benefits and by parliamentary approval of projects that create special pensions, as in the case of PEC for health personnel. The creation of a government of individual micro-entrepreneurs greatly worsened the imbalance in social security.
The Fiscal Responsibility Act was demoralized by its implicit abolition of art. Article 35 prohibited the Commonwealth from providing financial assistance to states and local governments and from ignoring the cost accounting and compensation regulations created by the new law.
For each tax benefit that is difficult to eliminate, another tax benefit is created.
Congress facilitated the metastasis of parliamentary amendments and the excessive increase in federal supplements to Hundeb.
Regulation of the energy sector is controlled by lobbying forces, extracting subsidies and market reserves for companies, and raising the costs of inputs essential to the competitiveness of the economy. The same law that authorized the privatization of eletrobras (a good reform) facilitated the distribution of unjust privileges.
Regulatory bodies, the state institutions that underpin the stability and quality of economic regulation, have been brought into political control through joint action between the executive and legislative branches.
Judicial decisions have expanded the number of users of social systems without worrying about the perverse incentives and costs that arise from them, such as the STF’s recent decisions on maternity benefits and the granting of BPC to female victims of domestic violence.
The process of privatizing or extinguishing state-owned enterprises such as Correios and Keitech, which remains a burden on public finances and productivity, has been halted by the executive authorities.
Although this tax reform has not yet been implemented, it will reduce costs and encourage investment and the rational allocation of capital. But it came with a myriad of special treatment burdens and increased costs associated with new transfers to state and local governments.
We keep taking steps, going back and forth. So far, this has been enough to prevent Argentina from falling into tragedy. However, this does not guarantee a bright future.
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