Rethinking the global crisis of COVID-19. The possibilities of an economic recovery in Argentina

Abstract

This renewed essay, based on the previous "thinking about the pandemic.of October 2020,
could no longer be presented with the character of preliminary, at least to the degree as in
that opportunity, despite the fact that, both then with 7 months elapsed since the start of
the pandemic in the case of our country, as now with 17 months of the pandemic process,
with the accumulation of negative and positive effects of the numerous and prolonged
quarantines associated with it and of the test and vaccinations.
At that time the unknowns were many more than the certainties, although both were
always relative; and the simplification of the public health versus economics dichotomy
could still seem relatively valid as well. In this renewed version of rethinking the pandemic",
the strategies of tests and vaccinations are incorporated, as well as the successive mutations
of the virus. From there, the possibility of verifying a hypothesis of a gradual convergence
between the relevant variables of public health and economic activity could be raised.
Currently, we already know that the Argentine economy fell almost -10 % of its GDP
(Gross Domestic Product) during the past year, thus becoming the 2nd worst economic
downturn in our modern history. It was only surpassed, almost 2 decades ago, in 2002, when
the economic contraction was almost -11 %. The effects of both very critical situations,
although with different causes, are gaining more and more similarities in their derived
economic results.
These results are even more equal, when it is recalled that, as in the years 2000 and 2001,
in the 2 years prior to the pandemic, 2018 and 2019, the Argentine economy had already
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contracted by around -5 % of GDP in those previous couple of years. Thus, unprecedentedly,
3 consecutive years of a cycle of economic recession were generated. This renewed essay still
continues behind the same two main objectives stated in the previous writing, although
now, as mentioned, with the incorporation of new protagonist agents.
In addition to the pandemic and the quarantines of 2020, this year the tests, vaccinations
and mutations of the virus also emerged from public health and; from the macroeconomy,
the effects of quarantines and the important (6 % to 7 % of GDP) monetary issue carried
out, without the counterpart of a relatively similar demand for money. The first objective
of the essay continues to be to deepen and continue with the proposal of the debate about
whether the massive appearance of the virus is a mega-point of global inflection or change
of era.
This is if the virus, with its subsequent and successive mutations, by way of a prolonged
“biological combat” with the defenses and then with vaccinations, added to the previous
stage of the millennial quarantine tactic, only modernized by tests, the following effects
derived from the “slowdown” of the economy, from the “stress” of the public and private
health systems, from the testing and vaccination strategies, does it have the amounts and
characteristics necessary and sufficient to be considered as a disruptive and global mega
event?
The second objective of the essay, facing the 2 deep crises faced by our country in the
first 20 years of the XXI century. 1) that of the years 2001/2002, which left very serious
consequences to this day; and 2) the present one, for the years 2020/2021, which is still in
process. Both ask us about what will be the most likely evolution of Argentina, in terms
of the region and the world, during the rest of the 21st century? Fundamentally, in terms
of additional restrictions to those already pre-existing, nothing minor, that would impose
on our country to resign for several more years the condition achieved as an “ emerging ”
country.
But now our country is no longer considered more .emerging", not even with the next
"borderçategory, but an unprecedented even lower category, that of "standalone". This
means the application of very strict restrictions on access to global credit by all international
financial entities and, therefore, with much lower future possibilities of relevant investments,
the generation of new registered private jobs and a process of economic growth. sustained
in the long term.
In our country they are accumulating, as if successive juxtaposed geological layers were
the periodic and very serious exchange, fiscal and monetary imbalances of the last, at least,
2 decades. All of them threaten domestic savings, investment, job creation and foreign
trade. In short, against total aggregate production, against a higher level of transactions in
economic activity and, finally, also against the possibilities of sustainable economic growth
in the long term.
The process is best visualized when it is recalled, as already mentioned, that the years 2018
and 2019 were very difficult, because the financing, via external debt, of the fiscal deficit
was abruptly interrupted. To this was added in 2020, the pandemic and the quarantines
associated with it and, despite refinancing the public debt, it was not yet possible to
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generate sufficient confidence to reopen the possibility of external credit, but, on the
contrary, Uncertainty increased and access to savings, both external and internal, was
further closed.
Let us remember that the public sector of our country, when facing the pandemic, did
not have external credit or contingency reserves, so the response was necessarily the high
monetary issue referred to, about 6 to 7 points of GDP. These are around $ 2.5 million
million (trillion) pesos that, although they avoided a crisis in the real and social economy,
surely even greater in the short term but that, inevitably, by doubling the monetary base
without greater production , will bring very negative consequences on the national currency
in the medium term.
In the past year 2020 we suffered the direct effects of the virus pandemic and the quarantines
used to mitigate it in terms of public health, but not in terms of economic activity. This
year 2021, we are now facing the effects of successive mutations of the virus, the detection
capacity of tests and vaccination strategies, plus the aforementioned indirect derived effects:
recession plus inflation and an economic rebound"that it grows weaker and weaker.