02/06/2020

What Argentine project for the post-pandemic?

In order to know how our path will be like after the pandemic, we have to look carefully at what we are doing during the pandemic. And what we are doing is simple: making a clear political decision on the course to follow and implementing it with determination.

It is easy? No. We found a State apparatus that had abandoned its will to transform reality. Suddenly, due to the emergency generated by an unprecedented crisis in the history of modern capitalism, we had to put that dismantled State back on track in order to implement the largest assistance that is known of, which already exceeds five points of GDP.

Let me give you an example from the sector in which I am compelled to act in this difficult situation. Despite being small compared with the development banks in other countries, from the Investment and Foreign Trade Bank (BICE) that I preside we quickly set a pattern in the lowering of the interest rate that the national government promoted. We came out with a line of credit at 19% for working capital and pushed the rest of the system downwards. We also intervened strongly in the deferred check market to promote more competitive rates for SMEs there as well. And through the Ministry of Production, the State provided guarantees so that private banks can lend up to $ 120 billion to companies in the emergency.

However, the lack of gymnastics in the financial system as a whole delayed the arrival of aid. Ours is a small system that lends little to the real economy sectors, even in normal times. And even less so to small and medium-sized companies. In our country, credit represents less than 15% of GDP, by far the lowest in the region. A single bank in Brazil, the BNDES, development bank, lends 9% of GDP and is partly financed with the contribution of workers. In Germany, the development bank finances 14% of GDP.

That same reality is reflected in all areas of public life, starting with health, which had been demoted from Ministry to Secretariat. The lockdown necessary to face the pandemic forced us to act quickly to rebuild the State in all its facets and make it go where it had never gone before: direct assistance to the most vulnerable sectors through the ANSES social security administration, the incorporation of 8 million people to the universe of assistance by the Emergency Family Income (IFE), and the direct payment of part of the wages of more than 2 million workers through the Work and Production Assistance Program (ATP).

Why do we say that the exit from the pandemic resides in the same crisis that we are going through? Because this same conviction and political decision to overcome the crisis is going to guide the recovery. The pandemic is teaching us something: the country is able to unite behind a great objective, in this case that of taking care of each other and saving lives in the face of a crisis in which there is no road map. The great challenge when the crisis passes is to sustain that greatness of objectives, no longer to shield ourselves from the threat but to build a future that is different from our past.

How can we double our GDP in the next decade? What do we have to sell, and what to buy, from the world? Where will we put the focus of our efforts? The government's project to create an Economic and Social Council is the first step in seeking consensus on those concrete, measurable and feasable goals. Unity around objectives is going to be fundamental in a world that will necessarily be less cooperative and more conflictive. Globalization and the institutions that claimed to lead it are in retreat, the world economy will have its biggest fall since the Great Depression of 1929 and each country is going to have to aggressively defend its interests and the quality of life of its citizens.

Like every time we fell, the strength to rise up will be in ourselves, and in our ability to release and drive the productive energies of our country. That force has been subdued for almost a decade: between 2001 and 2019 our GDP per capita decreased 11%. With each year that passed by, we moved further away from the country that we can be. The pandemic can and must be the turning point, because it showed us the tip of the iceberg of something else that we can be: a country committed to the common good and capable of working together to achieve it. And it found us with strengths and weaknesses. On the one hand, a recession of more than two years and a strong speculative indebtedness driven in an irresponsible way that led us to insolvency. But on the other, a renewed political leadership, which clearly defined an alliance with production and work, which is recovering the governance of our economy and, with it, the capacity for transformation. From that center, a national project for the post pandemic will emerge and I am confident that it will be different and better than everything we have seen before.

José Ignacio de Mendiguren is the President of Argentine’s Investment and Foreign Trade Bank (BICE).