| Work Detail |
The Ministry of Economy seeks that a program of small works be continued by the provinces or that the funds be returned. In the midst of the transfer cut, the IMF warned about the adjustment of the provinces
Mariano Boettner
Nation and provinces agreed to the transfer of 850 unfinished works to the governorates
Nation and provinces agreed to the transfer of 850 unfinished works to the governorates
The Government continues, in a double movement, the process of detachment from a series of public works projects that It does not plan to finance with the public budget within the framework of fiscal adjustment to reach zero deficit this year, a goal that it has just defined as “non-negotiable” in the latest conversations with the International Monetary Fund. The sector weighs the cost of this cut, assures that the year is lost and estimates that the interruption of projects could imply the loss of USD 6,000 million of investment made.
On the one hand, the Executive Branch expanded the list of provinces with which it signed agreements for the “transfer” of works, which implies that financing will no longer depend on the national Treasury but will come under the orbit of the governors. It is an initiative that was welcomed among companies in the sector, which assure that it does not imply a breach of contracts and that this transfer of jurisdiction could give continuity to projects that otherwise would have been stopped.
Sources from the Casa Rosada assured that this is, for the moment, a group of 850 public works that the Nation will no longer fund - or have the obligation to finance - and that will become the responsibility of the governors. This Tuesday the governors of Misiones, Hugo Passalacqua, passed through the Government House; and from Santa Cruz, Claudio Vidal, who signed agreements with the Chief of Staff Guillermo Francos.
“The Nation will transfer to each province various water works, construction or expansion of school and housing buildings, which will be continued by the provincial administrations. On the other hand, the national government committed to executing another set of strategic works with a high degree of progress,” indicated the Chief of Staff. Catamarca, Chaco, Chubut, Córdoba, Entre Ríos, Jujuy, Mendoza, Neuquén, Salta and Tucumán had already signed agreements of this type.
This Tuesday it was announced, through a resolution in the Official Gazette, that the Ministry of Economy - which has the Secretariat of Public Works in its portfolio - seeks to end the Argentina Hace program, a plan for small works (water works , sanitation, urban connectivity; equipment for gardens, neighborhood clubs, womens care centers and primary health care centers; infrastructure work for routes, access roads and signage and road renovation, placement of street furniture; , lighting and construction of sidewalks) financed by the Nation.
In this framework, the Palacio de Hacienda stated that this program will be phased out gradually in the coming months, according to the degree of progress of each project. There will be no more funding from the national Treasury. There is a window so that some projects can continue in case the work has already been completed to a certain extent. If it is close to completion, there will be a four-month period for it to be completed.
In other cases with slower progress, without money from the Economy, each governorate must decide whether to continue financing it with its own funds or obtain credit of another type to complete the work. An additional point is that the Treasury wants to analyze whether there were “non-compliances”, understood as funds transferred and not executed or rendered. If Luis Caputos team - the Secretary of Public Works is Luis Enrique Giovine - detected it, the Nation anticipated that they would rescind those agreements and demand that the governors return the funds. When asked by Infobae, official sources did not specify how much the budget in question would amount to.
The sector looks pessimistically at the remainder of the year, in the midst of a context of strong fiscal adjustment on direct public investment made by the national government but also cuts to capital transfers from the provinces. Before businessmen, the president of the Argentine Chamber of Construction (Camarco) Gustavo Weiss, estimated, in a broad account, that the stoppage of works would spoil some USD 6,000 million of investment.
Camarco is preparing, next week, to celebrate its annual convention in La Rural, in a difficult context for the sector. Weiss reiterated on different occasions that 2024 “is already lost” for construction and estimated that about 100,000 jobs were lost and that there could be more. The business entity will next receive, among other officials, Minister Caputo and Secretary Giovine, along with governors.
The financial suffocation of the Nation to the provinces, which includes capital shipments, was included in a separate analysis made by the International Monetary Fund in the latest technical staff report that it published this Monday. The organization estimated that the provincial consolidated ended 2023 in a situation of fiscal balance, a situation that it compared with 2019 (joint deficit of 0.6% of GDP) and 2015 (red of 0.9% of GDP).
“Provincial revenues have already declined sharply in real terms, including as a result of reduced co-shared revenues (down 17% year-on-year in the first four months of 2024) due to the recession and the previous decision to increase the tax floor. Profits; and cuts in provincial discretionary and earmarked transfers (a drop of 76%),” the IMF document noted.
“Meanwhile, provincial own revenues are also being negatively affected by the recession, and provincial spending is being adjusted proportionally (in the absence of access to markets),” the technicians mentioned. And in that sense, he outlined as a panorama that “the scope of the spending adjustment may differ between provinces.”
“Probably poorer provinces with limited revenue mobilization capacity (and therefore more dependent on federal transfers) could end up adjusting more, while wealthier provinces, including those dependent on mining royalties, may need to adjust less,” analyzed.
And he concluded that “efforts are necessary to improve the quality of the adjustment by expanding co-participating taxes (reforming Profits and reducing tax expenses). “This would also help avoid cuts to essential spending at the provincial level and mitigate the risk of disruptive financing (i.e. arrears or quasi-currencies).” One province has already incurred both cases: La Rioja defaulted on its dollar debt that it is trying to restructure and issued the Bocade, or “Chacho,” the provincial quasi-currency. |
