large firms; however, during 2013, “Government spending on energy subsidies rose almost 72% on the year to 60 billion pesos ($9.15 billion) between January and September, according to estimates by ASAP, a nongovernmental organization dedicated to improving public-sector finances.”<sup>56</sup>

# _New Supply Law (Ley 26.993)_

One overarching microeconomic policy consideration is the state’s ability to fix prices of consumer goods. With the new “supply law” of 2014, consumers were empowered to file complaints of price gauging by firms. In setting up the regulations of the law, in 2015, a supply monitoring system was established to be an early warning mechanism for supply shortages of basic goods. Large firms are required to report to the system. The new law opened wide scope for government intervention (price setting or goods confiscation) when judgments are reached against firms.

# **V. Macro-micro linkages and the political economy of future reforms**

Based on the historical survey above, there appears to be a macroeconomic dominance to the credibility of broader economic policy-making. Emerging from the hyperinflation of the 1980s, the top priority was stabilization. Once the decision was made to adopt the quasi-currency board arrangement, two problems emerged. First, to achieve macroeconomic consistency and credibility: fiscal institutions needed to be strengthened through a combination of fiscal rules, fiscal councils and reform of intergovernmental fiscal arrangements. Secondly, the only credible microeconomic approach that would assure growth would be to strive for flexible wages and prices via the liberalization of goods and factor markets. In other words, given the macro rules of the game, there was really only one credible path for microeconomic reform. Some authors cited above have argued that not enough was done on privatization, price liberalization and opening to international markets. Others have argued that internal devaluation through nominal and wage and price adjustment is almost impossible to achieve even in the most “liberalized” economic setting, and it is almost certainly _politically_ infeasible. If the latter is true, the overall convertibility scheme was never truly credible in the first place. Either way, when the “father” of convertibility began to tweak the definitions of the currency board during 2001, it was pretty clear to many economic agents that the end was near. To avoid the risk of “argen-dollar” denominated assets being converted into devalued pesos, it was better to convert to real dollars and take them overseas.

Similarly, during the post-Convertibility period, many actions on microeconomic reforms seem to have been driven by macroeconomic necessities. Broadly conservative macroeconomic policies initially were used to stabilize the exchange rate and bring inflation down to the single digits. On the other hand, they were also complemented on the micro level by price controls, in particular of public utilities. Macroeconomic policy was never fully institutionalized. For example, the fiscal responsibility law placed debt service limits on the provinces, but not on the federal government, and even at the provincial level, implementation was flawed. Monetary policy became subject to fiscal financing demands, with institutionalized monetary finance of

> 56 Wall Street Journal, January 3, 2014, “Argentina continues fight with utilities after power outages:  Government repeats threats to revoke concessions of two companies serving Buenos Aires.”

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