Juan Fourcaud - Oficina de Presupuesto del Congreso

ANALYSIS OF ADMINISTRATIVE DECISION ON THE DISTRIBUTION OF BUDGET LAW No. 27,591 FOR THE FISCAL YEAR 2021

by Juan Fourcaud | Jan 21, 2021 | Budget Law

The Chief of Cabinet of Ministers published Administrative Decision No. 4 by which it distributes the budgetary appropriations for the year 2021 in accordance with the provisions of the Budget Law.

The amendments introduced by the National Congress to the bill sent by the Executive Branch required reallocations for AR$ 97.82 billion but did not entail an increase in the total spending approved by law, but rather compensations, basically due to the reduction of Treasury liability items.

ANALYSIS OF NATIONAL GOVERNMENT BUDGET EXECUTION – YEAR 2020

by Juan Fourcaud | Jan 15, 2021 | Budget Execution

Property income was the only source of current revenues with a positive real variation (126.6% YoY) thanks to the transfer of profits from the Central Bank of Argentina (BCRA) for AR$1.6 trillion. This implied an increase of 7.9 times those received in the previous fiscal year. Without this transfer, total revenues would have fallen 16.7% year on year.
Regulatory changes with an impact on the PAIS tax and Wealth tax did not prevent the decline in tax revenues which, due to the recessive context deepened by the pandemic, fell 9.6% YoY in real terms.
Social security resources showed a decline of 12.1% YoY and revenues from FGS (Sustainability Guarantee Fund) assets fell by 61.9% YoY.
As a result of the outlays to face the health crisis triggered by the outbreak of COVID-19 and the increase in economic subsidies, primary expenditures increased by 17.1% during 2020.
The set of measures related to the COVID-19 crisis led to an accrued expenditure of approximately AR$917.8 billion, without which primary expenditure would have shown a slight expansion of 0.2% YoY in real terms.
Personnel expenditures were reduced by 8.9%, thus completing five consecutive years of real decline.
This mixed performance between resources and expenditures produced a net primary deficit of 7.4% of GDP in 2020, a significant deterioration compared to the deficit of 0.7% recorded in 2019.
Financial deficit grew from 5% of GDP in 2019 to 9.7% in 2020. The relative decline in debt interest payments was insufficient to narrow the gap between total revenues and expenditures.
Current appropriation in 2020 amounted to $7.76 trillion, which means that it increased by 59.7% in relation to the initial appropriation. Social benefits concentrated 61% of that total.

PUBLIC DEBT OPERATIONS – DECEMBER AND 2020 CUMULATIVE

by Juan Fourcaud | Jan 15, 2021 | Public Debt Operations

Marketable government securities for AR$450.1 billion and USD5.7 million (equivalent to USD5.49 billion) were canceled in December, of which AR$230.6 billion were cash payments, and the remaining were swap transactions.

Three auctions were held resulting in the placement of instruments in pesos for a total of AR $283.48 billion in original face value. In addition, a new auction was held to swap securities in pesos for bonds in dollars, in which bonds AL30 and AL35 were issued for USD750 million.

During December, loan disbursements for USD994 million were received and amortizations for USD173 million were paid, mainly for operations with multilateral credit organizations.

Interest payments totaled the equivalent of USD105 million in December, of which 60% were made in foreign currency. Interest payment on LEBAD at BADLAR rate + 500 basis points for AR$2.93 billion (approximately USD35 million) stands out.

During 2020, the Treasury held periodic auctions in the local market through which different types of instruments were placed. In the first part of the year, the largest placements were voluntary swaps of instruments maturing in 2020 for which mainly inflation-adjustable securities were delivered. On the other hand, fixed-rate securities, especially treasury bills issued at a discount (LEDES) predominated in the market in pesos. In the last months of the year, the issuance of dollar-linked securities (dollar-linked bonds in October and swaps of securities in pesos for dollar bonds in November and December), and floating-rate securities in pesos became more significant. Interest payments were made for a total of USD8.04 billion throughout the year.

Maturities in January are estimated to total the equivalent of USD10.5 billion (amortizations for USD10.2 billion and interest for USD271 million). By excluding holdings within the public sector, maturities are reduced to USD2.45 billion.

ANALYSIS OF NATIONAL TAX REVENUE – December 2020 and yearly total

by Juan Fourcaud | Jan 14, 2021 | Tax Revenue

Driven by an incipient economic revival and the increase in Wealth tax rates, tax revenue grew 38% in nominal terms and 1.6% in real terms in December, registering for the fourth consecutive month an increase above inflation. However, in 2020, it suffered a real drop of 7.4% year-on-year, which doubled that recorded in 2019 and completed a cycle of three consecutive years of decline.

In the last month of last year, VAT revenues grew 11.7% YoY and recorded the first real increase in twenty-six months. But there were falls in Social Security and Export Duties resources since the rise in the exchange rate did not offset the fall in foreign trade.
The recessionary context, deepened by the pandemic, is the main reason why tax revenue has fallen in 23 of the last 25 months in real terms.
The annual drop in VAT (17.7%) tripled the drop recorded in 2019 and the Income Tax doubled its decrease (-7.1%).
The combination of a drop in registered employment and the lag of nominal wages with respect to the general price level makes the rate of expansion of the wage base to be systematically below that of the CPI since June 2018. Social Security resources fell 11.4% in real terms last year.
The improvement in the exchange rate did not prevent the decline in revenues from Export Duties (29.5%), partly conditioned by the advances in foreign trade operations made by the agro-industrial sector at the end of 2019.
Despite previous regulatory reforms to strengthen revenue, in the first quarter of last year there was already a real drop in revenues, prior to the beginning of the social isolation caused by the pandemic.
In April, inflation-adjusted revenues fell 23.7% YoY, the sharpest drop since April 2002, largely due to the decrease in activity caused by the Mandatory Preventive Social Isolation (ASPO).
Tax relief measures to alleviate the economic effects of COVID19 on taxpayers reduced tax collection by an estimated AR$79.2 billion in the first half of 2020.
The year ends with four consecutive months of positive variations.

FISCAL IMPACT OF BILL ON ASSISTANCE AND COMPREHENSIVE HEALTH CARE DURING PREGNANCY AND EARLY CHILDHOOD (CD-54-2020)

by Juan Fourcaud | Dec 28, 2020 | Cost Estimates

The purpose of the National Law on Assistance and Comprehensive Health Care during Pregnancy and Early Childhood (Bill CD-54-2020) is to provide comprehensive care for the health and life of women, and other gender identities capable of gestation, and their children during the first years of life to reduce mortality and malnutrition, protect early bonds, physical and emotional development, comprehensive health, and prevent violence.

Based on the assessment carried out, it is estimated that the measures with fiscal impact for the national government would be those related to the expansion of family allowances policy (Sections 4, 5, 6, 7 and 10 of the Bill), training of personnel involved in the care of pregnancy and early childhood (Section 17) and the provision of medical tests and treatments for pregnant persons at risk of thrombophilia (Section 23).

The cost of the expansion of family allowances is estimated at AR$5.13 billion. For its part, it has not been possible to estimate the cost of personnel training since information on the duration and modalities, target population and personnel in charge of providing the training is required. Finally, in relation with the care for pregnant persons with high-risk pregnancy due to thrombophilia presumption, a fiscal cost of AR$381 million per 1,000 pregnant persons is estimated.

FISCAL IMPACT OF BILLS ON LOCAL FAIRS OF FAMILY FARMING AND SOCIAL ECONOMY, AND PUBLIC PROCUREMENT POLICY FOR THE DEVELOPMENT AND PROMOTION OF FAMILY FARMING

by Juan Fourcaud | Dec 23, 2020 | Cost Estimates

The purpose of Bill S-1111/2019 is to establish the Regulatory Framework for Local Fairs of Family Farming and Social Economy aimed at promoting and encouraging the consumption and direct trading of regionally produced agri-foods and produce to consumers throughout the national territory by regulating the organization of material means and human resources for that purpose.

The Bill includes several measures that involve increased budgetary expenditures. Based on the assessment carried out, the measures with fiscal effect for the national government are related to the actions for holding the fairs (Sections 2 and 6), and to credits and subsidies (Section 5). Based on the definition of its scope of application, the beneficiary population, and the items to be financed by the national government, an annual cost of AR$7.71 billion is estimated.

Meanwhile, Bill S-1112/2019 creates the Public Procurement Policy for the Development and Promotion of Family Farming to establish a regulatory framework that guarantees the purchase preference of Family Farming products and sets the requirements to be complied with in public procurements involving the national government.

The Public Procurement Policy provides for a series of requirements that public procurements must comply with in relation to the productions of Family Farming. Among them, a minimum market reserve of 30% is established for those purchases of food goods coming from production units, registered in national registries, when there is supply.

In principle, a fiscal impact is not identified for this Bill, but rather a redirection of spending.
It is estimated that training, dissemination, technical and financial assistance, and support for Family Farming producers may be carried out with existing resources. Trainings may be developed in coordination with INTA, SENASA and other specialized public or private institutions.