Economic outlook. Devaluation: war against wages
He Dolar blue it increased 28% so far this year and has already exceeded inflation accumulated to March (21.7%). Last week the parallel gained further momentum (+10.5%), along with financial dollars that rose more than 8%. A new currency run was unleashed driven by the “markets”, a euphemism for companies, capitalists, in general, and financial capital, in particular caused by the increase in inflation in March and the political crisis. This parallel dollar rise it is possible that it will trigger the remarking of prices in anticipation of a possible devaluation of the official exchange ratewhich will mean a blow to salary.
The minister lights candles to the United States and the IMF to obtain fresh funds to compensate for the dollars lost due to the drought. The green bills also came out due to debt payments, capital flight, and the remittance of profits from large foreign companies.
Massa intends to obtain a bilateral loan from the United States or for the IMF to provide more dollars in advance of disbursements, a loan that will not be free and will include more requirements from the agency. The Government expects to receive an additional US$10 billion from the Fund. Will the dollars arrive? Wait and see.
The “parity” of big businessmen
Faced with this critical situation a sharp devaluation cannot be ruled out. Although the Government makes adjustments to the official exchange rate and even the IMF asked it to speed up these movements, a bigger jump in the official dollar is possible, which will speed up prices and deepen the deterioration of the purchasing power of wages and therefore the living conditions.
A devaluation is a measure that generates extraordinary benefits for a few and means a transfer of income from the working people to big capital. Between the main winners are banks, investment funds, large companies that dollars leak Also they exporters (soybeans, mining, the field) and the big business they benefit from the devaluation of workers’ wages.
Let’s see what happens if the official exchange rate rises to $300, the same level that the government now offers agricultural employers for a term, but it is extended to all export sectors. In the case of exporters, for every dollar exported to April of this year they obtain $215 (average value of the wholesale dollar for this month). In the event of a devaluation of the official, for each dollar exported they would obtain $300. In other words, they would improve their income by almost 30%. This improvement is already pocketed by the soybean sectors and regional economies due to the measure of the agricultural dollar.
A few private companies control foreign trade. In 2022, according to INDEC, 49.8% of Argentina’s foreign trade corresponds to the trade of cereals and oilseeds with their derivatives, and 28.1% is the soybean complex. According to data from the Ministry of Agriculture, Livestock and Fisheries, based on the Affidavit of Foreign Sales, the companies that declared the largest tons of soybeans and soybean oil since the agro dollar came into effect and already charge these $300 for each dollar paid are: Cargill, Agro Mills, Viterra Argentina, Bunge Argentinaamong other.
While, Big business would also benefit from a devaluation due to lower wages measured in dollars. In January (latest data available) the average remuneration of registered employees was $241,966. At the official exchange rate, that salary is equivalent to US$1,125. If the official dollar increases to $300 it would become cheaper up to US$807: 28% less. The capitalist class as a whole will enjoy a cheaper average salary in dollars and with less purchasing power in pesos.
Losers of the devaluation
The main losers from a sharp rise in the official exchange rate are those who live on their salaries. Any devaluation is above all a devaluation of salary: this happened with the devaluation of Eduardo Duhalde in 2002, with that of Axel Kicillof in 2014, and with those that occurred during the macrismo.
Inflation projections are finding a new level that exceeds 100%, as the forecasts of the Survey of Market Expectations (REM) of the Central Bank. In the event that there is a devaluation of the official dollar, the price rise can continue to climb above this value due to the feedback between devaluation and inflation.
Massa at the beginning of the year proposed that the joint ventures have a ceiling of 60% per year or two agreements for six months of 30% in line with the inflation projected for this year in the budget, but the price increase sank that plan. The main unions of the CGT agreed to a quarterly parity scheme with average increases of 20%. But at the rate of inflation, the gap between the rise in prices and wages widens.
The success of any devaluation from the point of view of the capitalist class depends on several factors: the proportion of the devaluation must be greater than inflation, while the rise in prices must exceed the increase in wages. But the devaluation itself unleashes the inflationary process that needs to be contained. With the increase in the exchange rate, the prices of imported products and inputs rise. The prices of the products that are exported also increase internally due to the improvement in profitability obtained by placing them abroad.
The government that devalues needs to be able to inflict a defeat on the working class, deteriorating the purchasing power of wages. The key to success is if it manages to deteriorate real wages and, as a necessary counterpart, improve business profits.
How does the working class defend itself?
The defense of wages is in the first order against devaluationist pressures. The Minimum Vital and Mobile Salary in June will reach $87,987, less than half of what the poverty basket cost in March: $191,228, which does not even include rent. The minimum wage affects the million beneficiaries of Potenciar Trabajo and other plans with consideration, which take as a reference what is defined by the Salary Council. The union leaderships of the CGT and the CTA are complicit in the wage decline. An emergency increase in wages, pensions and social plans is urgent.
The Internal Board of ATE Indec calculates a “minimum consumption basket” as a reference for salary discussion. In the month of Marchestimated its cost at $295.694. The private registered sector average out-of-pocket salary in January was $200,832. In state and informal workers the salary is much lower. The prospect of achieving a minimum wage such as the one calculated by ATE Indec must be raised by the workers’ organizations, as well as the automatic updating of salaries based on inflation.
We share the update to MARCH 2023 of the exercises of what our minimum salary should be and loss of purchasing power of our income. https://t.co/pSvH0NhYJbhttps://t.co/DWBQ2hwPLg pic.twitter.com/v0BD9FMiJD
— ATE-INDEC (@ATEIndec) April 21, 2023
The Government is advancing with the adjustment to meet the goals with the IMF and in the event that it authorizes an additional disbursement, the demands will be greater. Massa failed to meet the fiscal goal for the first quarter of the year, however the Items such as retirement and pensions, Universal Assignment for Social Protection, Family allowances increased behind inflation in this period in relation to 2022, that is, there was a real cut, according to data from the Ministry of Economy. The agreement with the Fund and the payment of the fraudulent debt must be rejected.
External sales are dominated by a private oligopoly, mostly foreign: Cofco, Cargill, ADM-Toepfer, Bunge, AGD, Molinos. These companies control the main export ports, where control agencies, such as Customs, act as visitors. Thus, they have facilities to carry out all kinds of maneuvers such as: tax evasion, under-invoicing of exports, non-liquidation of dollars to the Central Bank. Thus, the country’s main source of dollars is outside the control of the State. The state monopoly of foreign trade under worker control I would remove that extortion tool that agro-export capital has to impose a devaluation. Everything that enters and leaves the country must be based on social needs, of what is needed to live.
Banks are the ones that have been organizing capital flight to tax havens for decades. It has been proven that it is large companies such as Techint, Clarín, Macri, Vicentín among other powerful ones that are fleeing. There are investigations that show that in 2001 80% of the leak was organized by Banco Galicia, Citibank, Bank Boston, and others. The nationalization of the banking system and the formation of a single public bank, under the management of the workersit is an urgent need to take care of national savings, finance public works (hospitals, schools, housing), grant accessible loans to workers and popular sectors, and help for small merchants or producers ruined by the crisis, and end the emptying of the country via capital flight.
An economic decline that dates back at least to the 1970s is accentuated. The business class and the capitalist political regime lead to widespread misery. The working class has to fight for its own way out of the crisis.