Industrialists, concerned: the red lights they see in the economy and the list of proposals to the Government

A little less than a year after Daniel Funes de Rioja took over the head of the UIA, the entity finally approved what the lawyer promised as soon as he arrived at the entity: the so-called “White Paper”. It is a working document, carried out jointly between all regions and sectors, which contains a diagnosis of the economic and industrial reality, goals to be met within four years, and proposals to be carried out in the different areas.

As industrialists have been emphasizing in recent months, although 2021 was a good year, after the sharp fall of the 2018-2020 period, the recovery was heterogeneous across sectors and regions. Industrial indicators have a gap with respect to historical highs and still have room to continue to develop their full potential, the text begins. Therefore, the suggestions in the book aim to:

1) that industrial activity should grow by 27% to recover the maximum per capita;

2) create 268,000 jobs to reach the ratio of 30.1 jobs per thousand inhabitants (record year 2012);

3) industrial exports increase by at least US$14.2 billion to return to the maximum per capita (950 USD per capita); and

4) that 7,400 exporting companies are created in order to reach the maximum of 3.7 companies per 10,000 inhabitants.

“The sustained recovery process will require the development of a variety of sectors throughout the country. In each of the regions of our country there are resources whose development is valuable for the generation of foreign exchange, both through additional exports and by attracting local and foreign investment (agribusiness, Vaca Muerta and offshore hydrocarbon exploration, forestry industry, mining, among others). Along with natural resources, it is important to think about a comprehensive industrial policy, with coordinated State policies at different levels aimed at improving the productive structure,” the UIA stressed in the text adopted this afternoon and entitled “Proposals for federal, sustainable and inclusive productive development”.

For entrepreneurs, the agreement with the IMF - which has not yet been approved by the Senate - is a necessary step in the normalization of Argentina's international financial relations and opens up the possibility of creating sustainable conditions within a process of growth, but also - the document says - “it will be essential to resolve the macroeconomic problems that limit the process of sustained development and condition the performance of industrial policy”.

For industrialists, there are three factors that limit investment and which persist over the past 10 years: macroeconomic factors (instability of the business cycle; lack of predictability of demand; high inflation and relative price instability; uncertainty about future profitability; limited access to foreign exchange; and high gap exchange rate); financial (low depth of the financial system and the capital market; scarce instruments for financing investment in the medium and long term; difficulty for companies to finance abroad due to high country risk) and tax (high tax burden that discourages reinvestment of profits and with a lack of investment incentives; a complex tax system with numerous collection and information regimes in a burdensome bureaucratic framework for SMEs; and distortive local taxes that reduce competitiveness).

This document, prepared from the contributions of the chambers that make up the UIA, contains proposals in three directions. Four priority axes with four parliamentary initiatives to boost production, as well as measures focusing on federal development and others aimed at making a leap in productivity and competitiveness. The objective is to recover industrial indicators in the next four years, with State policies that transcend governments.

The priority axes defined are: a system of incentives for industrial investment; new labour realities; SME development and export promotion. And some of the measures proposed in the different axes are the following:

- Tax simplification: reduce the administrative burden faced by companies and adapt certain aspects of the regulations that would have a positive impact on the productive sector.

- Tax incentives: accelerated repayment of investments; double amortization of investments 4.0; deduction of interest on equity used in investments; deduction of Exports by 10% of the incremental value FOB; effective application of the deduction of investments in enterprises; free availability immediate VAT credit; include marketing expenses in reimbursement of VAT to producers of capital goods

- Economic incentives: Access to foreign exchange for investment repayment and as an incentive for exports.

- Reduction of litigation and incentives for formal employment: modernize the fine regime (Laws 24,013 and 25,345) to reduce the level of prosecution of labour disputes, seeking to punish poorly registered employment without discouraging the creation of formal employment.

- Promote new employment: incentivize job creation through reductions in employers' contributions (90% first year and 80% second year), with additional benefits to youth employment and employment of women (5% more); update of concepts included as non-remunerative social benefits; early retirement scheme for workers over 60 years old with COVID-19 comorbidities.

- Dynamic collective bargaining and productivity incentive: promoting dynamic collective bargaining, enabling collective availability and bargaining at different levels; updating agreements in sectors that have had organizational changes as a result of technological and productive progress; incorporation of promotion of productivity.

- Strengthening the learning-work relationship: a regulatory reform is required in the technical-professional education laws and the internship law, among others, to move towards a new system of linkage to learning-work.

- Tax simplification and investment incentives for SMEs: Single Tax Account, reduction of collection and information regimes; accelerated repayment, deductions for investments with own capital, deduction of incremental exports, immediate free availability of the VAT tax credit, applying the tax to debits and credits to VAT and social security.

- Financing for SMEs: funding floor for FONDEP and FOGAR of 0.5% of GDP with subsidy of fees, direct loans and lines for companies not subject to credit, as well as guarantees for agile access with 100% coverage for Micro, Small and Medium; creation of investment financing lines with terms of 10 years, with BADLAR rate and FOGAR support, additional rate benefits for domestically manufactured capital goods.

- Promotion for export development: elimination of export duties for industrial goods and food processed and/or dosed at retail; increased refunds to industry (which offset internal taxes, with higher reimbursement for products that certify quality/incorporate country brand/ produced by regional economies), fast collection rates, reduced statistics rates and lower ceilings for SMEs.

Also, in this field, the UIA proposes stability of profits for five years to promote investment; access to foreign exchange for investment repayment, profit turnover, for access to inputs and participation in trade fairs based on incremental export amounts; promotion of forfaiting financing with more agreements banking abroad and customs, exchange and tax regulatory mechanisms in accordance with its operational scheme and development of export financing instruments with flexible requirements.

The entity also proposed measures to enhance federal productive development. “A paradigm shift in the development of regional economies and improved economic infrastructure (transport, logistics, energy, water and telecommunications) is important not only to achieve sustainable exploitation of natural resources, but also to move towards progressive structural change that facilitates development with equality and sustainability”, says the text. In this regard, the proposals range from issues related to the Fiscal Consensus, such as a Federal Infrastructure Plan, and region-specific policies.

Finally, the White Paper contains more than 100 proposals for actions and measures necessary to boost productivity and competitiveness in structural terms, as part of an industrial policy that must be comprehensive, with a forward-looking perspective that combines the needs of the situation with a strategic perspective in the medium and long term .

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