Suggestive government urgency for funds

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Why has Argentine government been so desperate for funds during the last 15 days? What about high surplus? It was really surprising to hear that (always with Néstor Kirchner's approval) ARG$1 billion will be sought in domestic market on Thursday, surely accepting a higher rate, without waiting for discomfort and uncertainty to disappear from market after farm clash. An old resource, like calling managers from pension funds and insurance companies to invite them gently (without going as far as using internal trade secretary Guillermo Moreno's style) to buy the new BONAR today, increased doubts about the real situation of government funds

Behind tax collection data unveiled on Tuesday night, it's possible to see that fund flood Treasury used to post month after month no longer exists. Out of the ARG$20 billions economists were expecting (according to poll made by Argentine Central Bank), only ARG$17.7 billions came in.


Treasury secretary, Juan Carlos Pezoa (really following Moreno's style), tried to disguise figures signalling that it was a seasonal matter (during March, public holidays of Holy Week as well as of Memory Day coincided). There was neither full impact of farm strike, other than on export tariffs, which not even explain half of the ARG$2.3 billions between profits and bids.

During the last 15 days, another old resource was used: asking Argentine Central Bank (BCRA, in its Spanish acronym) transfer of its profits or part of them. Another ARG$1 billion went to Treasury. This will be reported with March surplus figures in the area known as "Non-taxable Revenues", which should take place during the third week of April.

The other side is that decision (also of Néstor Kirchner) of not putting a brake on government spending rise is already working in full. Average increase of expenditures hovers around 38 per cent (against 2007), which is, all in all, what explains government's thirst for funds. There's no more room to rise tax pressure. Government no longer has the Last Resource Taxpayer: the farm. With high voltage of late conflict, it was made pretty clear that there's no more room for more export tariff rises or the like. At the same time, Venezuelan president Hugo Chavez has stopped being the last resource lender to finance new debt issues.

The fact that Argentina is getting into a fruitful fiscal period with collection of annual maturities of Income and Personal Assets Taxes works in favour. However, superabundance of cash in Treasury is no longer what it used to be: economy minister Martín Lousteau has to receive governors, in the following hours, who were left outside late benefits launched to ease up farm strike.

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