The fiscal adjustment plan launched by the Argentine Government unleashed a growing conflict with the provincial governors, whom the president, Javier Milei, accuses of blocking his ambitious economic reforms, while his Administration deepens the cut in funds transfers to the districts. of the country.
The confrontation is increasing: from verbal exchanges, it went to Justice – several governors have gone to federal courts and the Supreme Court – and now several oil provinces threaten to cut off the supply of hydrocarbons next Wednesday if the national State does not transfer them the funds they claim.
Of the 23 Argentine provinces, plus the autonomous city of Buenos Aires, none is governed by La Libertad Avanza, the far-right formation led by Milei, who assumed the Presidency on December 10.
Although there are governors who are clearly opposed to the new Administration and others who are more “dialogue-minded”, all districts have been affected by the fiscal adjustment plan equivalent to 5% of GDP undertaken by Milei and by its reform package aimed at deregulating the economy and which was reflected in a decree signed by the president in December and in the draft of the so-called ‘omnibus law’, whose parliamentary debate foundered.
Milei places much of the blame for this legislative failure on the deputies who voted against the project – or part of it – following the political orders of the governors of the provinces to which they belong.
Many provincial leaders, in turn, accuse Milei of trying to clean up national public accounts by placing the provinces as an adjustment variable and refusing to give them a greater participation in the distribution of taxes collected at the federal level.
The numbers from the public accounts in January show a significant cut in transfers from the national State to the provinces.
According to a report by the Argentine Institute of Fiscal Analysis, spending on total transfers in January “turned out to be the lowest real value for a month of January in the entire period 1993-2024.”
Provincial accounts are affected in various ways.
On the one hand, there are the automatic transfers that the national State must make for the distribution of federal taxes, which have decreased in real terms.
On the other hand, there are non-automatic transfers, which fell 82.8% year-on-year in real terms in January and are divided into current transfers (financial assistance to provinces, educational funds, shipments to provincial retirement funds, among others) and capital (funds destined for public investment).
Current transfers fell 72% year-on-year in real terms in January.
Regarding capital expenditures, “transfers to the provinces were cut almost entirely in energy, transportation and housing, while in education and drinking water and sewage they were reduced by more than 96% in real terms year-on-year,” he noted. CMF bank in a report.
«Tax sharing and discretionary transfers have a lot of weight in the income of the provinces, especially in those in the north. In these provinces, 74% of their income comes from co-participation and 9% from discretionary transfers,” Leonardo Piazza, director of the consulting firm LP Consulting, told EFE.
The cuts have greatly strained relations between the national Executive and the governors, whom the president called this Friday “fiscal degenerates.”
The province of La Rioja went to the Supreme Court to request that the application of Milei’s decree be suspended and threatens to issue a ‘quasi-currency’ (substitute currency for the peso) to be able to cover its expenses.
La Pampa also went to Court, but to demand the elimination of transportation subsidies. Chubut, for the same reason, already achieved a favorable ruling in a lower court.
For their part, Río Negro and Misiones sued the national State last week for not sending to the provinces the teacher incentive funds that are used to pay about 15% of teachers’ salaries.
And now Chubut threatens to cut off its gas and oil supply if it does not receive the funds it demands, a decision that has been supported by the majority of provinces.
#Mileis #fiscal #adjustment #unleashes #storm #governors #Argentina
**Interview with Provincial Leader on Argentina’s Fiscal Adjustment Plan Conflict**
**Interviewer:** Good afternoon, and thank you for joining us today. We’re here with Governor Lucía Fernández of Mendoza Province to discuss the escalating conflict between provincial governors and President Javier Milei over the recent fiscal adjustment plan. Governor Fernández, can you explain how the fiscal adjustment has impacted your province specifically?
**Governor Fernández:** Good afternoon, and thank you for having me. The fiscal adjustment plan has had a severe impact on Mendoza. As you mentioned, the automatic and non-automatic fund transfers from the national government have drastically decreased. This reduction affects essential services, including education, healthcare, and infrastructure development. Our ability to sustain these services is increasingly under threat.
**Interviewer:** The president has accused the provincial governors of blocking his economic reforms. How do you respond to that claim?
**Governor Fernández:** It is not fair to point fingers at us. Our role as governors is to advocate for the needs of our provinces and our constituents. While we understand the necessity for economic reforms, we believe that hitting the provinces hardest is not the solution. Rather than obstructing reform, we are asking for a more equitable approach that allows us to participate in the decision-making process regarding our budgets.
**Interviewer:** You mentioned that some provinces are more dialogue-minded than others. What is your perspective on reaching a compromise with the national government?
**Governor Fernández:** Compromise is essential. We need a government that is willing to engage with us and consider the unique challenges faced by each province. While some governors may take a harder stance, many of us are prepared to negotiate and collaborate on viable solutions. However, it requires respect and recognition of our autonomy and the economic realities we face.
**Interviewer:** There are reports about potential actions from oil-producing provinces to cut off hydrocarbon supply if their demands for funds are not met. What’s your stance on such measures?
**Governor Fernández:** I understand the frustrations that lead to such drastic measures. If the federal government continues to neglect our needs, provinces that rely heavily on oil revenues feel they have no choice but to act. It’s a last resort to make the federal government pay attention to our plight. We want to avoid any drastic actions, but we need to emphasize our dire situation.
**Interviewer:** Given the current climate, do you believe there is any hope for a productive dialogue with President Milei’s government?
**Governor Fernández:** Hope lies in our shared responsibility to the people of Argentina. If the national government is open to hearing our concerns and genuinely seeks solutions that consider both the national interests and provincial realities, then we can find a way forward. But it requires a fundamental shift in approach, rather than simply viewing provinces as adjustment variables.
**Interviewer:** Thank you, Governor Fernández, for sharing your insights. It’s clear that the situation is complex and will require careful negotiation moving forward.
**Governor Fernández:** Thank you for having me. I remain hopeful that we can find common ground for the benefit of all Argentinians.
