Roberto Lavagna
"The IMF is open to discussing a reactivation programme with Argentina"
"Despite concealing it, Cristina has already accepted that what is happening in Venezuela is a disaster.'' declared the presidential candidate.

Roberto Lavagna was perhaps Argentina's last successful Economics Secretary. He was in office under two presidents, Eduardo Duhalde and Nestor Kirchner. During his tenure, the South American country grew at Chinese rates of 9% GDP, he brought the country out of debt and had two surpluses.

The now-candidate for president received LPO in the offices of Ecolatina, the consultancy he led in the years following leaving the Department of Economics in 2005, when working with Kirchner became impossible. "We were looking at a great opportunity to grow for 10 years in a row. But the train derailed, we came from 8 consecutive years of stagnation and in almost no economy the size of Argentina had something like this happened," he recalls of those years.

He prefers not to make any predictions for the primaries, and thinks that the rift is useful for Macri and Cristina, and that Sergio Massa, Miguel Pichetto and some radicals used it in order to negotiate with some of them.

Do you not believe that as Macri says, the worst is over and now the economy will start to look a lot more positive?

In these situations, we must always consider the credibility of who is talking. "Zero poverty", "new beginnings" and "floods of investments". Now, I don't know what you're referring to is called, which I have also seen, but I don't know what new name they'll give it. I prefer to look at the concrete facts, and at the moment, no substantial change is indicated.

One of the things that yourself and Frente Todos repeat is that it is necessary to incentivise consumption. What measures would you take?

It's nice to hear others repeat what one has said, it's a sign that one has had an effect. I would take three simple measures: raise the minimum living wage, which the government has also announced. It works as a benchmark and generates an increase in salaries.

Transform personal loans in a system whereby indexing would be by wages rather than by other financial variables. And, modification of income tax, particularly for the lowest scale of workers.

The failure of Cristina's government and now Macri's, is related to the lack of political-economic coordination. The former emphasised consumption with no importance given to investment, leading to economic stagnation and inflation. The latter said that consumption belongs to the populists and that a surge in investment would arrive, however no one invests in a country with no demand. 

All of this leads to a little lining of people's pockets, without any big spikes or drama, but instead a persistent policy of improving purchasing power, at least until the 16% and 20% that has been lost in the course of the last year is recovered. None of that is going to go to the dollar, to financial speculation. It will go to productive activity.

And, simultaneously (and here the word simultaneously is key), generate impact on the supply side, such as lowering taxes in return for investment in taking on more staff and some credit lines for working capital to allow the capital that is already installed to start and to respond to demand.

Why do you emphasise the word simultaneously?

Because the failure of both the previous and current government relates to an error in this sense. The previous government emphasised consumption with zero importance to investment and the conclusion was stagnation, inflation etc.

And the current government said that consumption is a populist thing and an increase of investment would come. And obviously, no one invests in a country where there is no demand. They forgot that in a capitalist economy you invest in order to make profits. No one invests when there is no profit-making, therefore the key is that both things are simultaneous and the economy kickstarts.

How dependent is the next president on the settlement with the IMF?

I spoke with people from the IMF who came to see me. The head of the IMF for the western hemisphere (Alejandro Werner) said to me: "Well, from my personal perspective, I would not feel opposed to discussing a re-activation economic program instead of an economic program concerned with adjustment policies".

Must the next government refinance the debt?

I believe that the current government should have begun to do so, given that the relationship is on good terms- they must start now. The IMF is the first to know that Argentina in 2021 and 2022 cannot repay 50 billion dollars. If we all know that we must refinance and this government is getting along so will with them, it would not be a bad idea to start now.

Macri should begin to renegotiate the agreement with the IMF now; everyone knows that in 2020 and 2021 Argentina will not be able to repay the nearly 50 billion dollars that the government lent it.

Numerous candidates say that the value of the dollar is not up to date and that we need to devalue it again. What is your opinion?

I don't like answering specifics about the dollar. This is an economy that has been stagnant for 8 years, something that is unique around the world. There are very few cases such as this one, in which an economy of this size is stagnant for 8 years.

If we consider the increase in population, which gained 1 point per year, this gives a 9% decrease in the income of each Argentinian, if it were to be distributed evenly. Since it is never distributed evenly, a particular sector lost between 15-20% and another earned more.

What I say is that in order to get this economy out of its stagnation, we must give it some pointers of which direction to head in, which is that of prices. And within prices we have: wages, exchange rates, interest rate, tax rate, which is an implicit price. These ?prices' as a whole are what drives financial speculation at the moment. We must get the economy to shift towards productive activities.

¿ Do you not fear that a reduction of taxes wouldn't result in investment and employment, as has happened in other instances?

No, because it would be intended for investment, for it to be invested in infrastructure and in the recruitment of staff. And with capital gain we're not talking about stockholders: it will be money that workers receive.

Would you propose a labour reform law or would you prefer to discuss each collective agreement by activity?

A combination of both.

You wouldn't rule out a labour reform?

It depends how it would be. I would rule out a labour reform carried out under an adjustment programme. That would be useless, other than some businessmen being able to pocket a bit of extra cash. The reform that needs to be done would have to be within the framework of an expansion programme, which can be global or sectoral.

"I would rule out labour reform within the context of an adjustment program, yet I do believe in labour reforms that go hand in hand with an employment expansion program."

A current example is the Vaca Muerta oil field. A provincial government (because the national government came to power after), and a trade unionist, Guillermo, Pereyra, succeeded in a major labour reform. The compensation for that was that 30,000 job posts were created. Yes, to a reform that drives the creation of employment. No, to a labour reform in the middle of stagnation

Does the failure that is seen when the numbers that fall at the end of Macri's tenure are reviewed have to do with the nature of the economic program or with malpractice?

It is to do with the nature of the program. There is malpractice too, but it is to do with an incorrect approach. Macri's first declaration was to go to [the economic forum of] Davos and say: "I've been told that there will be floods of investment and the economy will start moving". The rains never came. Indeed, the opposite happened, whereby Argentina rained from the inside out, because since Macri arrived, 70 billion dollars have left the country, not in a malicious way, but because investors are looking for more profitable yields elsewhere.

Here there is no profitability, because there is no demand and instead that demand is sought in places such as Uruguay, Paraguay, Chile, Colombia, Miami or Switzerland. The initial mistake was to believe that since they had treated him nicely, or because they had been educated, that that would change things. This is not the case.

What do you think is happening in Argentina where there seems to be a paradoxical situation? Many people say they are disappointed with Macri and at the same time do not want Cristina back, but then in the polls it says that the majority vote is divided between the two.

Currently there are some people who do not want Cristina to return and a huge amount of people who do not want Macri to continue. For starters, those two poles reinforce each other. From the beginning of the mandate, each of them have chosen the other as their biggest rival. And they have a relationship with economic power, with the establishment, with the media. And all of that creates a trap, which to go through the middle of is difficult.

Who approached you to propose running for president in January and how many of them are not here today?

It was very varied. There were trade unionists, businessmen, and I even had a meeting with 50 academics. Some have stuck around and others have not.

Are you surprised that all of the people that asked you to run are no longer around?

No, no, it doesn't surprise me at all, because in Argentina there is a tendency to play to win, so to be frank, I'm not at all surprised. I'm experienced with this.

Is there a downgrading of the Argentine establishment in the sense that in some cases it supports the very person or people who end up damaging it?

Yes, but the business sector always has some room to change if productive activity goes wrong. As someone once told me, "I cover up the machines and turn to the financial market and when things get better I uncover the machines and I start to produce again." The worker doesn't have that margin. I'm not saying that all businessmen have it, because they have staff to maintain, but there's some room for flexibility, when losing on one side they cross over to the other side.

I already demonstrated my criticism of Chavez in 2007 when Venezuela was in an infinitely better situation than it is now. Now it has been made clear that it is a major disaster, and I think that Cristina has accepted this- she hides it, but she cannot ignore reality.

You recently confirmed your candidacy when Alberto Fernández announced his. Would you have started a process to compete for the presidency if in January you knew Cristina would not lead the group?

Yes, without a doubt, because I do not think anything has changed substantially from the point of view of power.

Well, lots of governors supported you and then endorsed Alberto.

Well, yes, there have been changes of course, what do you want me to say?

Do you think the risk of initiating a drift towards Venezuela has been depleted in Argentina?

I hope not. The example of what has happened to Venezuela should be enough. It is said that in an anti-political attitude, in 2007 I demonstrated myself to be a critic of Chavez in 2007, who was in a situation infinitely better than the current one. I did this because I had a feeling that he was going down the wrong path. Now I think there is nothing to debate: it is a major disaster and that has been understood by everyone who is with and for Cristina. Perhaps they conceal this publicly, however they cannot ignore reality.

In 2005, you left the government with a country out of debt and growing at unprecedented rates. What failed since then that caused us to be in this situation?

At that moment, there was a 4% primary surplus, a 3% current account surplus, economy prices were in order and geared towards growth, which is why the average growth was 9% per year. I saw the possibility of creating an anti-cyclical fund that I announced in 2005, which would help to balance the economy and allow a very strong tax cut.

I presented a 0% capital gains tax project to SME companies, it passed lightning quick with the deputies and then Kirchner let it die in the senate when we left. He was looking at an economy with every chance of growing and without expensive commodities: at that time, it was 225 dollars a ton.

Argentina now has 51% of its youth out of study and without public health. In 25 years' time, instead of having unionized workers, as was the norm in Argentina, we will have a society with people lacking in everything.

For heaven's sake! We could have had an Argentina that grew 7 or 8% for 10 consecutive years. These 10 years that were lost, could have been of growth, with stability. Unfortunately, they got it wrong. Argentina had 2 historical opportunities: 1962 with Arturo Frondizi and 2006, where I did not need to continue, but the policies needed to.

In addition, we were two years away from a commodity boom that no one considered and three years from a reduction in the EDF interest rate that put it at almost 0%. When we were there they were at 5%. And we would have been in a debt-free situation! It's is in these moments that a train derails.

What do you think the future holds?

Well think about how argentine society will be in 25 years' time. We have 51% of our youth uneducated, without public healthcare. Instead of unionized workers, which was the norm in Argentina, we will have a society of people who lacked everything. 

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