Posted by on April 29, 2021 12:08 pm
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By Enrique Blasco Garma, Libertad y Progreso

By Enrique Blasco Garma of Libertad y Progreso

 

DATA CLAVE- The main purpose of the Central Bank of Argentina (BCRA) is to preserve the value of the currency. Inflation, which is now 75 years old, confirms the failure of BCRA. Why can’t it deliver? The State subordinates the value of the currency to finance the fiscal deficit produced by the rulers who spend more than the state income.

 

The shortfall is financed by the BCRA. BCRA then becomes an appendage of the government. My book “For a Fairer and Flourishing Country” explains Argentina is chained to “concessioned private appropriations”, protected from the competition of better alternatives. Such “appropriations” impoverish, first the unprotected, and finally, everyone.

 

We have become a land of personal advantages protected by laws, regulations and practices against competition, to the detriment of the excluded group. Inflation is not alien, it completes the confusion of prices and regulations to the detriment of the income of the whole.

 

This was tested by Convertibility, the experience from 1991 to the beginning of 2002, without inflation. It prohibited the BCRA from issuing pesos to finance activities. It only allowed issuing to buy dollars at one peso; and sell dollars at one peso, with the consequent contraction of the issue. Separately, they privatized companies and released regulations that eliminated much of the “concession appropriations.”

 

The releases to competition and increased certainty fueled novel skills, providing opportunities for millions of people and strong growth in individual income.

 

In 1989, the average income of the population had fallen, after previous devaluations, to $5,985, at 2020 US consumer prices. With Convertibility and the new powers, income grew to $14,740 in 1998. A huge economic expansion.

 

However, towards the end of the decade, the Southeast Asian crisis, the Russian default, and the devaluation of the Brazilian real, exacerbated the deep fall of the soybean and raw material markets, contracting revenues to $11,815 in 2001.

 

This decline generated uneasiness and opened a door for those who had lost privileges with the reforms of the years 1990/99. They led a reversal, which they achieved with the resignation of De la Rúa, in the last days of 2001. Institutional destruction pulverized income, which fell to $4,312 in 2002.

 

Left on track, the privileges of “concessionary appropriations” will continue to increase poverty. The aforementioned book proposes 30 releases to triple the income of the group and thus reach the level of Spain.

 

The National Anthem insists “Freedom, Freedom, hear the noise of broken chains, See the throne of noble equality”. Let’s do it. Let’s move from Louis XIV’s “I am the State” to President Lincoln’s “Government of the people, by the people, for the people”.

 


Enrique Blasco Garma Academic Director atLibertad y Progreso