It is difficult to assess the extent of the damage caused by the Pandemic crisis and its impact on the economy, and in particular on jobs, in just six months. These are the typical effects of war, where companies and jobs disappear, and a part of the invested capital vanishes. More than one million jobs have been lost, and work off the books accounts for 50% of the market.
Article by Julián A. de Diego published in El Cronista on September 15, 2020
Noncompliance with the laws currently in force, and an international tradition in which Argentina has failed to honor its debts have given rise to uncertainty, ambiguity, loss of confidence, and above all, a complete lack of a government model that can be easily understood by citizens with reasonable expectations for a better future. Today local investors have more doubts about what to do than foreigners who keep a closer eye on the model built on State policies.
In this context, a wide array of measures is expected to help recover confidence, encouraging investment to flow, activating activities linked to commodities in general first, together with the return of micro enterprises, and then covering the sectors that have been left behind, such as hotels, tourism, and domestic and international flights.
Our analysis is based on three basic premises.
FIRST: No horizon ahead if the federal and representative democracy is not guaranteed, respecting the National Constitution and the fundamental rights it enshrines, in particular the right to property. Martín Yesa, Mayor of the coastal city of Pinamar, has given an example by reaffirming his stance against the occupation of land and acting accordingly.
SECOND: The second premise is linked to the stance of the Executive on the nationalization of services, expropriation (such as the failed attempt in Vicentín), and the increase in activity and the volume of the public administration superstructure. As a result of the process of debureaucratization and going paperless in the last couple of years, today only one in four national, provincial and municipal civil servants perform actual functions. As to Education in the Province of Buenos Aires, for each teaching position there are three teachers, who work less than half a year on average.
THIRD: The third premise calls for a deep labor and social security tax reform, redirecting the body of tax laws towards an economy that rewards growth, and replaces regressive taxes, adapting the pension and social security system to promote efficient public utilities based on tax collection.
The labor reform should unravel the tangle of the Mandatory Social Preventive Quarantine, which is based on five actions:
- Double severance pay for termination without cause under Emergency Executive Order No. 4/2020;
- Paid suspension under Section 223 bis (Employment Contract Act);
- Emergency Aid Program for Employment and Production (ATP, for its acronym in Spanish);
- Ban on layoffs due to lack of work or reduction in operations or for force majeure or without fair cause; and
- Act No. 27555 on Remote Work.
Now this series of actions will have to be launched to return to the New Normal, with an unprecedented fall in all micro- and macro-economic indicators, financing the process through currency printing.
The resources that will have to be used are based on the following concepts:
- Investment promotion requires clear rules that will be kept over time without changes that may affect investors and taxpayers. Contradictory decisions or misconduct that fail to observe fundamental rights will discourage any venture capitalists;
- Job creation requires a challenging promotional plan that release companies from employers’ contributions when they can give evidence of genuine job creation based on pre-established parameters for a reasonable period of time of at least two years;
- The passage of the laws of the future, a new Act on remote work, about industry and knowledge services, and about what it will be like in the era of 4G, 5G and artificial intelligence;
- The promotion of startups through financing, the elimination of taxes and social security contributions, and technical advice, especially when they generate employment;
- To avoid brain drain and capital flight, it will be necessary to compete with countries like Uruguay that are attracting investors with clear actions, which encourage capital flight, depriving us of what is most profitable for our future.
As to substantive measures that imply substantive reforms, we can mention:
- The Employment Termination and Unemployment Fund (Fondo de Despido y Desempleo): It will be contributory, funded by 2% of gross wages into a Trust, covering all workers from their start date after the effective date of the law creating the fund, and gradually including the rest with each year of contribution to increase financing;
- Company-wide collective bargaining: limited to the operational needs of each company for the benefit of both parties;
- Subsidies must become onerous and bilateral: all subsidies will be paid in exchange for community service, public services support, and completion of arts and crafts courses, and training sessions to re-enter the market;
- We must draft project contracts: whose validity is limited to accomplishing a certain goal with a start and end date for each work.
- We must include new technologies through legislation without violating court precedents and current regulations, where the new regulations overlap with the existing ones without affecting vested rights.
Leave this recession behind while promoting a return to work ethic is essential to pursue the path to growth, which was lost more than ten years ago, in a context where investment should consider new technologies and new forms of work organization, within a reasonable legal framework.