The Macri Government’s Reform Program: A Scorecard

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Argentina’s Mauricio Macri assumed the presidency on December 10, 2015, following twelve years of rule by Presidents Nestor Kirchner and Cristina Fernandez de Kirchner. At the outset, the Macri government found an economy mired in low growth and a country largely disconnected from the world. The series of reforms that the Macri government initiated were aimed at reintegrating Argentina into the world and producing economic growth, stability and predictability for citizens and investors alike.

The following scorecard is a list of the most significant reforms being planned and executed by the Macri government. We hope this summary helps to deepen understanding of the choices that are on the table and demonstrates that reform processes are incremental, as each reform moves forward at its own pace. This scorecard will be updated monthly as we see tangible progress on individual reforms. The current status of the reform can be found on the back of the corresponding card. We welcome your comments and feedback, as no such accounting of reforms can ever be complete.

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REFORMS BY SECTOR

SORT

  • Completed   

  • Incomplete   

  • In Progress/Partial Success   

Elimination of export restrictions on agriculture

Complete

DIFFICULTY: High

The former government severely restricted exports of agricultural products. Duties aimed at keeping food prices low in domestic markets, restrictions discouraged production and alienated farming sector.

Actual implementation of this decision was easy as it only required the issuance of decrees. The elimination of export permit system, Register of Export Operations (ROES) was replaced by Declaraciones Juradas de Ventas al Exterior (DJVEs), which eliminates the pre-approval requirement for export sales.

Promotion of renewable energy

In Progress

DIFFICULTY: Medium

Argentina has great potential use for solar and windpower that has been developed to a limited extent- new government wants to promote large, private investment. Approved legislation requires use of increasing proportions of energy from renewable sources.

Measure’s success remains uncertain. The government is taking the right steps towards implementation. Public tenders are in process for construction of new facilities. The tender for 1000 MW received 123 bids for 6666 MW. The Ministry of Energy approved 17 projects for US$ 1.8 billion & 1109 MW. In November, the Ministry awarded 1,281.5 MW to 30 projects.

Electoral reform

Incomplete

DIFFICULTY: High

Proposed electronic voting; new campaign financing regulations; banning “listas colectoras” except when parties are of a formal coalition; mandatory debates for presidential candidates; regulating transition between administrations.

A bill was sent to Congress in June 2016. The Chamber of Deputies approved electoral voting, elimination of listas colectoras, election of presidential without vicepresidential candidates, and a fifty percent quota of female legislators. The Senate failed to sanction it in 2016 and postponed treatment of the bill.

Reduction of government subsidies on prices of public services

In Progress

DIFFICULTY: High

A large number of substantial subsidies distorted relative prices, encouraged excess consumption of utilities and greatly increased the budget deficit.

Elimination of subsidies caused significantly increased inflation and negative reactions from citizens. Price hikes were partially achieved but some measures were rolled back by temporary judicial rulings. New price increases of public services have been announced. They should result in further reductions of subsidies.

End of Argentina’s default on sovereign debt

Complete

DIFFICULTY: High

After Argentina defaulted on its foreign debt in 2001, an important number of Argentine bond holders sued for settlement. The new government has made agreements with almost all of the “holdout” creditors.

This reform was very difficult as it required reaching agreements with all bond-holders; submitting an offer that US federal courts would support; and obtaining Congress’ approval of a law. All measures were achieved by April 2016. Since the resolution, Argentina’s credit rating has improved and interest rates charged to Argentina have dropped substantially.

"Return to the World"

In Progress

DIFFICULTY: Medium

Previous administration under President Kirchner had isolated Argentina and strained Argentina’s international relations. New government has begun proactively strengthening relations within the Americas and internationally.

Argentina partners around the world have given a positive response; however, specific goals will demand prolonged negotiations. Argentina will host the G-20 summit in 2018 and seeks membership in OECD. New observer status in the Pacific Alliance grouping and declared interest in TPP.

Elimination of extensive non-transparent import restrictions

Complete

DIFFICULTY: Medium

Almost all imports were subject to authorizations issued on non-transparent and discretionary criteria.

The measure could have been difficult due to lack of foreign exchange, but trust in new government prevented a rush of purchasing foreign currencies. New SIMI import system procedure replaced the previous import system (DJAI).

Elimination of Export Duties

In Progress

DIFFICULTY: High

All export duties were eliminated in January 2016, except those on soybean and soy products, which were reduced. Remaining duties will be gradually reduced. An additional 5 percent reduction will be effective on January 1, 2018.

Elimination of duties caused one-time increase in domestic prices of certain food products. This measure was difficult as duties on industrial and agricultural products, particularly soy products, are an important part of budget revenue. Until December 2015, exports in nearly every sector (manufacture, agriculture, mineral, etcetera) were taxed.

Elimination of Foreign Exchange Controls

Complete

DIFFICULTY: High

After years of strict and inconsistent interference in exchange markets, effective January 2016, foreign currencies can now be bought and sold without restrictions in Argentina.

The measure was expected to be difficult but trust in new government made its implementation easy. Foreign exchange markets have been stable since implementation of the reform. Many remaining minor restrictions were eliminated in December 2016.

Integral Tax Reform

In Progress

DIFFICULTY: High

Integral tax reform will require the sanction of a complex congressional act because of the number of taxes to be reformed and of the conflicting interests that will have to be harmonized.

Reforms to be introduced in laws that regulate various taxes. An important step was achieved in December 2016 with the sanction of a new income tax law.

Plan Belgrano

Incomplete

DIFFICULTY: Medium

A large program to improve infrastructure in the northern provinces of Argentina. The primary difficulty will be obtaining funding for all aspects of the plan.

Plan Belgrano includes construction or improvement of highways, railroads, water supply and sewages, airports and harbors. Projects need to be defined, tenders must be called, works assigned to the winners and the plan financed.

Multiplying of dual highways

In Progress

DIFFICULTY: Medium

Dual highways serve a limited number of large cities. This network’s extension will provide high speed safe transportation service to many other cities.

New highways have to be defined, tenders must be called, works assigned to the winners and sufficient funding must be obtained to cover costs.

Modernization of Suburban trains in city of Buenos Aires

In Progress

DIFFICULTY: Medium

Modernization of suburban railroads that serve an area where about nine million people live and/or work. Elimination of obstacles to automotive circulation in the city.

Mostly obsolete suburban trains travel over dated railways, with deficient signaling and other safety devices. Railroad lines cut streets in the city of Buenos Aires affecting automotive traffic.

Reform and redeployment of security forces

In Progress

DIFFICULTY: High

Transformation of the Federal Police into a force principally focused on the struggle against federal crimes, especially organized crime. Reinstatement of the Gendarmerie’s role as a border patrol force.

Until 2016, the Federal Police had been concentrated in the City of Buenos Aires. Almost 20,000 federal agents were transferred to the new local city police force while the rest are being redeployed around the country. The Gendarmerie will return to protect borders. Reform will incorporate retirees to cover less demanding tasks.

Redefining roles for the Armed Forces

In Progress

DIFFICULTY: High

Acquire state-of-the-art equipment and improve maintenance of old but usable equipment. Redefine the aims of military factories and equip them adequately, securing their efficient performance. Difficult as the armed forces have been neglected for 15 years.

Most equipment is obsolete and old but usable equipment is not adequately maintained. Most military factories are idle or producing inefficiently goods for the civilian market.

Increase international cooperation

In Progress

DIFFICULTY: High

Increase peacekeeping operations. Form “Cruz del Sur” Task Forces with neighboring countries such as Brazil and Peru, similar to that which exists with Chile.

In the past Argentina played an important role in peace-keeping operations. Now they are limited. A joint task force exists with Chile. This policy of close cooperation with a neighboring country should be reproduced with Brazil and Peru.

Clear definition of areas where mining is to be allowed. Homogenization of laws and regulations

Incomplete

DIFFICULTY: High

Complete the inventory of glaciers. Reach greater uniformity of provincial regulations.

A national environmental law bans mining in areas neighboring glaciers. Laws in some provinces ban the use of cyanide compounds and other chemicals and open-pit mining. An inventory of glaciers is inprogress.

Strengthening ties within trading blocks and between trading blocks

In Progress

DIFFICULTY: High

Strengthening of MERCOSUR and its free-trade agreements (FTAS). Establishment of FTA’s between Argentina and other countries.

Mercosur has been increasingly isolated from the movement towards globalization. Agreements with the European Union and the TPP are now the aim. First steps have been taken towards a bilateral agreement with Mexico. Measures are also being taken to increase trade with Canada.

Reorganization of the Judiciary

Incomplete

DIFFICULTY: High

Reorganization is required in order for Judiciary to deal effectively with organized crime; creation of new federal courts and specialized bodies of officials and investigators to support them. New procedural laws must redefine roles of judges and prosecutors.

Some of these reforms are included in the Justicia 2020 Program. Existing federal courts cannot handle the number and complexity of cases and are overwhelmed by corrupt practice investigations. Fighting organized crime requires personnel with state-of-the-art training and equipment.

OECD membership

In Progress

DIFFICULTY: High

OECD membership means paying lower interest rates and having greater capacity to attract investments.

OECD eligibility requires major reforms in legislation and the operation of great many areas of government. It would imply a major cultural change in government, business, labor and civil society.

Federal Internet Plan

Incomplete

DIFFICULTY: Medium

Extension of Internet connectivity to 1200 communities through optic fiber links.

This federal program intends to combine private and public funding to provide fiber optic connection to 1200 towns and cities by 2018.

Sanctioning of a new Telecommunications Law

Incomplete

DIFFICULTY: Medium

Different telecommunication media are now regulated by separate laws. The aim is to have only one law drafted with new realities in mind.

The government is in the process of drafting the new law and has created a website to encourage citizen participation and suggestions in the writing of the law. The new law will reform and update the Audiovisual Communication Services Law and the Argentina Digital Law. On November 1st, the government extended the deadline for drafting the law by 180 days.

Dioxitek’s NPUO2 uranium mine in Formosa

In Progress

DIFFICULTY: Medium

Construction of a mine that will produce 460 Tm of uranium dioxide per year.

This mine should produce enough uranium dioxide to supply all the needs of Argentina’s nuclear reactors. The construction was delayed because of protests against the environmental hazards. The government has yet to obtain full funding.

CAREM-25 and RA-10 nuclear reactors

In Progress

DIFFICULTY: High

CAREM-25 is a 27 MW nuclear reactor designed in Argentina for small cities. It can reach up to 300 MW. RA-10 is a 30-MW nuclear reactor for the commercial production of radioisotopes used in industry and medicine.

The degree of difficulty, particularly for CAREM-25, derives from its being a major scientific, technological, engineering and industrial challenge. Its design is wholly Argentine. RA-10 will supply all of Argentina’s demand and allow exports.

Renovation of the Embalse Power Plant

In Progress

DIFFICULTY: High

Embalse, one of three of Argentina’s nuclear power plants is being refurbished to deliver power for thirty more years.

The 600 MW Embalse power plant began operating in 1984. It is undergoing major renovation aimed at increasing its capacity to 700 MW and extending commercial operations for thirty-years.

Argentine Productive Plan

In Progress

DIFFICULTY: High

An all-encompassing plan aimed at increasing productivity and creating 200.000 new private sector jobs. The proposed plan will foster competition, transparency and entrepreneurship, by enforcing macroeconomic measures and infrastructure projects.

Difficulty of the plan lies in the magnitude of the objective. Multiple obstacles have to be faced. Macroeconomic goals such as lowering the cost of capital and infrastructure projects aimed at providing adequate energy supply, transportation and communications are addressed in individual reforms.

Access to Clean Drinking Water

In Progress

DIFFICULTY: Medium

Only 87% of urban residents receive drinkable water through pipelines and about 50% of households are not connected with public sewers.

The Plan aims at reaching 100% supply of potable water though pipelines and the construction of sewers to serve 8.9 million persons in three years.

National Innovation Plan

Incomplete

DIFFICULTY: High

Today investments in research and development (R&D) are between .6 and 0.7% of GDP. The Plan aims at raising them to 1.5%.

The Plan seeks to balance private and public investment in R&D to reach the 1.5% of GDP target. An additional measure to increase R&D is to promote the hiring by commercial companies of personnel with postgraduate degrees.

Increase of low-cost funding for SMES

In Progress

DIFFICULTY: High

The National Financing Plan, complemented with the National Productive Financing Plan and the Development of Capital Markets Plan.

These programs recognize the obstacle to growth posed by limited and high-cost funding supplied by the Argentine financial system and capital markets. These Plans seek to provide low-cost funding to small-and-medium-size enterprises and promote financial inclusion.

Increase employment and productivity

Incomplete

DIFFICULTY: High

A set of programs to increase skills among workers particularly those unemployed; reduce labor costs while maintaining wages; and employ young adults.

Unemployment is higher among both young adults and those less skilled, but formal employees are costly for many businesses. In order to be competitive, Argentina must develop high-wage-skilled-intensive niche activities as opposed to focusing on low-wage labor intensive industries.

Promotion of Shale Gas & Oil

In Progress

DIFFICULTY: Medium

The Vaca Muerta reservoir puts Argentina among the top holders of non-conventional hydrocarbon reserves in the world.

On January 10, President Macri announced an agreement among all public and private stakeholders that would reduce costs and pave the way for very large investments in the Vaca Muerta region. Initial investments of USD 5 billion are expected in 2017.

Implementation of National Energy Plan

In Progress

DIFFICULTY: Medium

Goal of adequate and balanced energy supply by installing 22,000MW new power capacity by 2025. Renewable energy will be responsible for 20 percent and nuclear energy for 10 percent of total output.

The Plan Nacional de Energía aims to balance the demand of households, government and productive activities with adequate reserves to face climate changes and accidents. Contracts are being executed for 59 projects that represent 2,400MW of new wind, solar and biomass energy.

Expanding Fiscal Base and Complying with Social Security Legislation

In Progress

DIFFICULTY: Medium

Distrust in tax authorities led many Argentines to hide assets. At the same time, the Executive did not comply with Supreme Court resolutions regarding pensions.

In July, Congress approved a moratorium on undeclared assets with reasonable penalties. Funds collected will be applied to comply with social security legislation that had not been applied correctly. As of December 2016, USD 93.842 billion were declared and 106.760 billion pesos were collected.

Expanding Commercial Air Travel

In Progress

DIFFICULTY: Medium

For many years Aerolíneas Argentinas prevented other airlines from expanding services and entering the Argentine domestic market.

In December 2016, a process of reform was started that should result in greater investments by private companies already present in the domestic market and new companies starting to serve it.