Juan Fourcaud - Oficina de Presupuesto del Congreso

ANALYSIS OF NATIONAL GOVERNMENT BUDGET EXECUTION – SEPTEMBER 2020

by Juan Fourcaud | Oct 27, 2020 | Budget Execution

In the first nine months of the year, national government revenue grew by 5.0% YoY in real terms, while expenditure grew by 9.4% YoY, mainly driven by expenditures to mitigate the consequences of the pandemic.

Excluding the profits transferred by the Central Bank (BCRA), which totaled AR$1.17 trillion as of September, total resources contracted by 17.6% YoY in real terms compared to the previous year.
Primary expenditures increased by 21.9% YoY, basically to mitigate the health crisis.
As of September, approximately AR$723.2 billion of expenditures related to COVID-19 were accrued, without which primary expenditure would have expanded by 2.4% YoY in real terms.
The primary balance up to September 30, 2019, excluding BCRA profits, went from a surplus of AR$75.9 billion to a deficit of AR$1.4 trillion in the same period of 2020.
Social programs registered an execution of AR$85.1 billion in the first nine months of 2019 and AR$671.9 billion in the term January-September 2020, which means an increase of 447.0% YoY in real terms.
The initial budget for the year increased by $2.7 trillion and 62.7% of this increase was allocated to reinforce social benefits.

FISCAL IMPACT OF BILL ON THE CREATION OF A REGISTRY OF ENERGY-INTENSIVE IRRIGATORS (S-0024/2020)

by Juan Fourcaud | Oct 22, 2020 | Cost Estimates

The Bill proposes the creation of a Registry of agricultural producers that use irrigation with intensive electric energy consumption and provides for a set of tax measures to encourage those producers to replace that system for less energy-demanding irrigation technologies.

The benefits included in the Bill are a reduction in the VAT rate for the purchase of electric energy, reduction in current energy rates and access to credit lines for energy reconversion.

The analysis carried out by OPC shows that the direct fiscal impact is very low, since the VAT reduction mechanism on purchases of certain links in the production chain only has a financial impact for the taxpayers subject to that tax.

BUDGET BILL 2021– ANALYSIS OF TAX RESOURCES

by Juan Fourcaud | Oct 20, 2020 | Budget Law

The Budget Bill for the year 2021 estimates tax revenue at AR$6.46 trillion for 2020, and AR$9.3 trillion for 2021. The expected dynamics imply an increase of 28.6% YoY for 2020 and 43.9% for 2021.

OPC (Argentine Congressional Budget Office) estimates for 2020 a total national public sector tax revenue at AR$6.35 billion – AR$74.23 billion (1.1%) lower than the estimate made by the Ministry of Economy. For 2021, OPC’s estimates are up to AR$8.9 trillion – AR$395.47 billion lower than the 2021 Budget Bill projections.

In real terms, 2021 Budget Bill projects a revenue decline of 9% YoY for 2020, and a 9.7% YoY recovery for next year. OPC estimates that tax revenue will increase 6% YoY in 2021, a less positive dynamic than that projected in the 2021 Budget Bill.

OPC estimates that in 2021 the national government will receive 64.3% of tax resources (AR$5.98 trillion). Of this total, 35% (AR$3.26 trillion) will go to Social Security Agencies, 29.1% (AR$ 2.7 trillion) to the Central Administration, and 0.2% (AR$15.26 billion) to

Decentralized Agencies. Other entities will receive 3.7% of total resources (AR$341.99 billion), and the provinces 32% (AR$2.98 trillion).

The Budget Bill estimates that during 2021 tax expenditures will reach 2.64% of GDP (AR$995.8 billion). Of that total, 73.9% are related to special regimes included in the current tax legislation (AR$735.66 billion) and the remaining is allocated to various economic promotion programs (AR$260.14 billion).

These figures do not show significant changes with respect to 2020, a year in which the total tax expenditure is expected to reach AR$714.73 billion, equivalent to 2.63% of GDP, with a similar composition.

BUDGET BILL 2021- PUBLIC INVESTMENT

by Juan Fourcaud | Oct 16, 2020 | Budget Law

National government’s public investment foreseen in the 2021 Budget Bill will increase to 2.0% of the Gross Domestic Product, 0.6% higher in terms of GDP and a real increase of 51,3% YoY in allocated resources. Transfers to other jurisdictions gain relative share and works related to transportation and housing stand out.

Public investment in 2021 would change in its composition in relation to the projected closing for this year, with an increase from 59.4% to 62% of capital transfers to the detriment of real direct investment.
Public investment increases in all regions of the country, but mainly in interprovincial or national jurisdiction – categorized as “unspecified” -followed by the Pampas region.
The function Transportation will have a real increase of 58.1% YoY, mostly due to works within the scope of the National Road Authority (Dirección Nacional de Vialidad) and the purchase of railway equipment by the Ministry of Transportation.
The provinces that explain the year-on-year increase in real direct investment are in the Pampas region: Province of Buenos Aires (121.1% YoY), and in the Northwest Region: Salta (808.4% YoY) and Jujuy (444.6% YoY).
The Province of Buenos Aires continues being the main recipient of investment projects, with 37.9% of total resources, a concentration even higher than that estimated for the closing of 2020 fiscal year.
The two projects that require more resources are the renewal of Belgrano Cargas railroad tracks and the improvement of the Roca Urban Railway, branch Constitución-La Plata.
Transfers for Education and Culture are equivalent to 12.3% of total capital transfers, but represent a real increase of 333.9% YoY, basically due to the improvement of kindergartens’ infrastructures.
Deconcentration in the execution of public works is being consolidated.

BUDGET BILL 2021 – ENERGY AND TRANSPORTATION SUBSIDIES

by Juan Fourcaud | Oct 16, 2020 | Budget Law

Next year’s projected expenditure on energy and transportation subsidies amounts to AR$805.8 billion, which is equivalent to 2.2% of Gross Domestic Product (GDP), at the same level of that foreseen for 2020. Of these funds, 77.4% is allocated to subsidize the gas and electricity sector, and 22.6% to transportation.

Since 2017, energy subsidies have grown 0.5% of GDP and in 2021 they will be at 1.7%, same as this year. The highest record was in 2014, with 2.8%.
The most significant allocations are for the electricity sector, with AR$446.6 billion foreseen in the Budget Bill for 2021, a real increase of 4%.
Users will face 43% of the estimated cost of electricity next year, a level comparable to that of 2016.
The energy deficit in the last decade averaged USD2.98 billion, contrasting with the trade surplus of that time.
A total of AR$71.7 billion will be allocated in subsidies to natural gas supply, which implies an increase of 5.3% with respect to the expected for 2020.
A rise in subsidies to natural gas demand is also foreseen, including a higher subsidy to liquefied gas cylinders.
Transportation subsidies would remain at 0.5% of GDP, with an increase for motor vehicles and a cut for trains.
Travel on working days will increase 200% and the AR$12.7 billion to finance social fare implies a drop in real terms of 17.7% in relation to the expected for 2020.
In the last months, 91% of the costs were covered with subsidies and the passenger load factor was 5%.

CROSS-CUTTING POLICIES IN 2021 BUDGET

by Juan Fourcaud | Oct 15, 2020 | Budget Law

The Budget Bill for 2021 shows a decrease in allocations for cross-cutting policies in real terms. with respect to the estimated closing for 2020 (3.6% for gender equality policy, 2.7% for children and adolescents, and 9.1% for the care of persons with disabilities)
On the other hand, items related to actions against gender-based violence, sexual and reproductive health, educational infrastructure, digital education, and spending on the defense of children and adolescents, show significant increases in real terms.

The Budget Bill makes gender equality a priority of budgetary policy: the allocation of resources loses to inflation, but its share of total spending rises to 19% next year.
The item Gender Violence will have an increase of 618.5% in real terms: AR$4.5 billion will be allocated to “Acompañar”, a new program to assist persons and groups most affected by gender violence.
The budget assigned to the Ministry of Women, Gender and Diversity registers a real increase of 765% compared to 2020.
The resources allocated to the Alimentar card will have a reduction of 34.8% in real terms and the contributions to school canteens will decline 22.6%. This year, these programs received exceptional reinforcements in the context of the health emergency.
The provision and supply of vaccines for children and adolescents will rise 5% in real terms and the amount of fortified milk will increase 61%, but the allocation to the Garrahan Hospital will fall 11.7%.
Universal allowance for social protection shows a budgetary decrease of 11.7% in real terms, which is lessened, but does not change its trend, if we consider the extraordinary outlays granted in the framework of the pandemic during 2020, which raises the basis for comparison.
Funds for the construction and improvement of kindergartens will increase by 595%.
Resources for disability care will fall by 9.1%, partly because special assistance granted during the pandemic is not considered for next year.