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Portugal: you need reforms, not miracles

September 17, 2019 1:29 pm A+ / A-

Clarín – Most Argentines and our politicians are prone to find magical solutions to avoid solving the deep problems that have affected Argentina for decades. Now, we are excited about the “Portuguese Miracle” where it seems that, without effort or cost, a great crisis was overcome. A new myth that some from politics try to impose; but from whose reality of successes and mistakes we can learn.

During the management of the Socialist Prime Minister José Socrates, the State grew phenomenally to reach 52% of GDP (local production). As it was impossible to pay with taxes, a fiscal deficit of 11% of GDP was created; which led the country to a crisis. So far your story should sound similar. In 2011, he assumes a center-right Prime Minister, Pedro Passos Coelho, with the responsibility of solving the underlying problems in the framework of a credit agreement with the Troika, formed by the IMF, the European Central Bank and the European Union.

During his administration, public spending fell to 45% of GDP and the fiscal deficit to 4.4% of GDP. This meant reducing the State employees plant by about 20% and salaries by up to 23%. In addition, private sector wages were reduced by up to 15%, working hours increased and the retirement age was extended, among other measures that involved great sacrifice. The result was that in 2014, after three years of recession, the economy began to grow.

A serious mistake was not to reform its rigid and outdated labor legislation at the beginning of the reforms; which brought unemployment to 17% in 2013. In that year, this problem is faced and from there unemployment fell, reaching 12% in 2016.

In this year, another Socialist Prime Minister, Antonio Costa, assumes in Argentina is said that he solved the underlying problems “with growth”; which is false, since it received almost all of them resolved and, therefore, the country had already two years of economic growth. However, it had the virtue of continuing along the same path of fiscal austerity and of not reversing the structural reforms carried out. The deficit is currently 0.5% of GDP and since then the level of activity continues to grow; So today, unemployment is below 7%.

So there was no miracle. Just get down to work and solve the country’s underlying problems; That is the first lesson that we Argentines should take. It is impossible to avoid a crisis if you try to maintain a useless state that is impossible to pay, even squeezing workers and entrepreneurs as oranges. Reforming it so that it serves people and can pay with reasonable tax levels does not necessarily mean leaving someone without income. It is true, there will be those who will be left without a position in the State because today they do not provide a useful service to the people or, worse, a regulation that complicates life was created to justify using it. However, in Argentina, the Public Employment Law provides that those who run out of a position can be made available and collect an income without having to go to work for one year, which could be extended to two. During that time training programs should be implemented and subsidize the entrepreneurs who take them.

This will allow, in time, to reduce the enormous tax pressure on our productive sector. An employee who fails to pay income tax, works around the middle of the month for the State and is it strange that it is not enough for him to support his family? Among 190 countries, Argentina is in the 21st position of the most squeezed with taxes to its companies. And we expect investments to rain over Argentina?

The second teaching is that, together with the reform of the State, one must do a job that allows creating many productive jobs. The current one is archaic and so rigid that it is unable to do so even in the periods of growth. In any of the last 20 years, more than 40%, and many times more than 50%, of the Argentines were unemployed or worked in the shadow economy or had unemployment insurance disguised as public office or welfare plan.

Finally, we must take advantage to eliminate the tangle of regulations that were invented to justify useless public employment and that asphyxiate entrepreneurs and SMEs preventing them from progressing.

Whoever is in Casa Rosada on December 11 does not give clear signs of facing the necessary structural reforms, we will have a new crisis that, like all the previous ones, will liquefy the disastrous results of not solving the pending problems. If you face them, we will not only avoid the debacle, but we will have an additional jackpot. All the countries that made these reforms, at least tripled the purchasing power of their salaries in the next 20 years. Worth the effort.

Let’s vote and demand that it be so.

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