September 03, 2007
“…Argentina has the potential to double the quality of living standards for its citizens in a 10-year period, and I am very optimistic about the possibility of doing this.”
In an interview with the Americas Society and Council of the Americas, Roberto Lavagna looks at the direction of the country since his tenure as Minister of Economy ended in 2005. Highlighting Argentina’s potential to capitalize on its recent stability and economic growth, Lavagna emphasizes the need to “get back on track” to secure its economic gains. Stimulating investment, reforming institutions to prevent consolidation of executive powers, and industry-wide job creation are among his priorities. Lavagna also outlines foreign policy and trade plans.
AS/COA: What are the pillars of your presidential campaign for the October 28 elections? What is your vision for the country’s future?
Lavagna: The campaign “President Lavagna” is focused on spreading the news of something we have called the Lavagna Plan (www.presidentelavagna.com). On August 9, we presented our plans for the government’s first 100 days in office; on August 15, our employment plan for small and medium-sized businesses; on August 22, our security plan; and on August 29, our plan for education. We will continue to present our projects each week until October 28. Argentineans are tired of combative politics and partisan disturbances that have become run of the mill in the last few years. Argentineans are asking us for solutions that address concrete problems: employment, security and education. We are not going to be a destructive opposition but rather an alternative that rises above the current government.
Based on the high quality of both natural and human resources, Argentina has the potential to double the quality of living standards for its citizens in a 10-year period, and I am very optimistic about the possibility of doing this. Argentinean society responded admirably to what was the worst crisis in the country’s history and it moved ahead with great strength. Today, the country faces an opportunity but the government is not taking advantage of it because it has lost its direction. The mistakes made in institutional, economic and foreign policy matters over the last two years will cost us a great deal if we are not able to get back on track and implement an agenda of necessary reforms for the country’s development.
AS/COA: In your new book La Argentina que merecemos (The Argentina We Deserve), you point to the country’s great potential. Why do you believe that Argentina is better prepared now more than ever to take advantage of the available opportunities?
Lavagna: Because at the end of 2005 the country had a solid macroeconomic plan. That is something unheard of if you keep in mind the last forty years of our country’s economic history. Specifically, that is:
- an exchange rate that allows us to be competitive and austere as a country;
- a surplus in both foreign trade and fiscal accounts;
- debt restructured in such a way that it is sustainable over time, combined with a policy of debt reduction;
- low interest rates; and
- an improvement in terms of trade and exchange between Argentina and the rest of the world.
Even though the macroeconomic plan has progressively deteriorated due to political mistakes made in the last twenty months, we believe that as long as the right corrections are made to steer the economic program back toward its original course – the one laid out in April 2002 – it will continue being a propitious moment for promoting growth and implementing the necessary reforms in institutional matters, investment stimulation and infrastructure as well as in social and public services critical for consolidating a process of sustainable development.
AS/COA: One of your plan’s proposals is for lowering taxes first and foremost for small and medium-sized companies as a way of stimulating job growth. What industries do you think will most benefit by this plan?
Lavagna: Lowering the earnings tax for small and medium-sized companies that invest in and create employment—the same general consideration guides our employment program—has the virtue of being a horizontal policy that does not distinguish among different sectors. In this sense, no particular industries are favored or disfavored nor are there any specific winners. All small and medium-sized companies will benefit, without distinction, automatically, without any intermediaries or bureaucratic red tape.
AS/COA: What are the biggest changes that the current administration made after your departure from the position of Minister of Economy? How have these changes affected the country’s direction?
Lavagna: The negative changes that the government has implemented are substantial. To point out the gravest:
In institutional matters
- In 2006, the government reestablished budgetary superpowers that allow it to reassign resources—at its own discretion—of the budget voted on and approved by the Congress.
- In 2006, the government modified the authority of the Judicial Council, which is the body with the ability to name, sanction and remove judges from power. With the reform sponsored by Senator Kirchner, the executive power wound up with control over a vital organ for assuring a balanced republic.
- In 2006, the government modified the authority of the Financial Information Unit (UIF), which is the organ that has as its objective combating money laundering and terrorism financing. Before the reform, the UIF was led by a board of directors elected competitively. Since the 2006 reform, members are appointed by the executive power.
- At the end of 2006 and beginning of 2007, the national government intervened with the body in charge of official statistics (INDEC). It displaced its civil servants, and since then, it has tampered with statistics related to prices, poverty and wealth distribution. Before the INDEC affair, the government had already filled up all the positions in technical bodies such as the Commission for the Defense of Competition, the ONCCA, the SIGEN, and the Anticorruption Office.
- It exacerbated clientelism and the political control of provincial jurisdictions with its discretionary management of public works projects.
In economic matters:
- The government used up half of the fiscal surplus that I and my economic team left it with in December 2005.
- The government introduced price controls and prohibited exports in certain sectors such as the meat and dairy industries.
- It authorized a six fold increase in transportation and energy subsidies.
- Price—as in the case of the energy sector—and cross-subsidy distortions increased, all of which discourage investment and do not favor the sectors that have less resources.
- Inflation was exacerbated by an inadequate mix of monetary and fiscal policies that gave an excessively expansive direction to economic policy for electoral reasons.
- Economic policy stopped being pro-active, it went on automatic pilot and it turned exclusively towards authorizing increases in public spending.
- The regime’s inability to administer matters and a lack of transparency resulted in delays in necessary energy projects—despite the government having the resources to finance the works—that led us to a severe crisis.
In foreign policy matters:
- The President added to the country’s isolation through bad decisions, such as an unnecessarily confrontational position at the Presidential Summit at Mar del Plata and his cultivation of tight relations with the Chávez regime.
- The government provoked a lack of confidence from neighboring countries (for example, Chile and Uruguay) through its irresponsible management of the energy crisis and the crisis of paper producers along the Uruguay River.
- The government gave Hugo Chávez an unrestricted platform in Argentinean territory for speaking out aggressively about other countries.
AS/COA: In terms of foreign relations, you have always prioritized strategic relations with MERCOSUR countries. How do you envision the development of relations with North American countries in the future?
Lavagna: MERCOSUR represents the front line of Argentinean foreign policy, but it is not the only front. Relations with the United States are essential for Argentina as they are for other countries. In the area of bilateral relations, three main themes interest us:
- International security will be one of the main points of our agenda. Argentina already suffered two horrendous terrorist attacks in the past. Assuring a high level of security in the Southern Cone is in the best interest of Argentina and Brazil as well as making sure that the Triple Border is a safe place, without any presence of international terrorism. We also envision cooperating with other countries in the eradication of narcotrafficking, preventing nuclear proliferation and promoting a stable Bolivia, etc.
- The second item on the bilateral agenda must be the protection of democracy in the region. We know that representative democracy and republican values are being threatened by the populist model of government promoted by Chávez, which fraudulently promises a “direct democracy.” Under the weight of charismatic leadership and a penchant for taking advantage of growing social divisions, this model seeks to undermine the institutions of the republic. The response must be a solely Latin American one.
- The third priority is commerce and trade. We hope that the United States does not give in to protectionist temptations in negotiations that take place within the realm of the WTO. It is difficult to think of the stability of the international system without a just order of business: one that does not discriminate through the use of subsidies and trade barriers for products produced in poor countries. We are interested in advancing a bio-energetic program.
Canada and Mexico offer an attractive market for Argentinean products as well as an opportunity for developing an increasingly sophisticated business exchange.