One universal truth of cuts, re-organisations and other austerity measures is that, somehow, they never affect the folk organising them. Strange, that… The government of Argentina has come close to breaking this rule by announcing that it intends to axe about half of its ministries in an attempt to cut public funding.
Argentina is in an economic crisis where investors remain unconvinced that the nation can manage its debt burden. It recently had to tap a loan from the IMF worth $50 billion which it had hoped to hold as a reserve fund for contingencies.
A decade ago, the US Doller would buy 3.15 Argentinian Pesos (ARS). This gradually rose to 6.5 by January 2014; 13.8 by January 2016; 18.4 in early January this year before a spectacular collapse which started in April and currently sees the US currency buying 38.6 ARS. This means that Argentina is now paying twice as much for imported goods and raw materials priced in Dollars than it did less than six months ago. In a bid to shore-up the Peso, interest rates set by the central bank was recently raised to 60%; inflation is currently running at 31.2%.
The Argentinian government has not said which ministries will be cut or amalgamated yet, but it has said that a tax will be levied on agricultural exports from next year at 4 Pesos on the Dollar of value. The nation is a major exporter of soy meal and soy oil; corn, wheat and unprocessed soybeans.
Argentina intends to balance its budget next year and be operating a surplus of 1% in 2020 (excluding interest payments). The political decision to cut ministries will require approval from parliament (including the ministers affected). Time will tell if the moves are enough to curtail the fall in the value of the Peso.