Argentina's Provinces Can't Compete With China's

The provincial leadership structures in the two countries operate in very different ways, particularly when it comes to incentives.

Argentina's Provinces Can't Compete With China's
Luis Rappoport


BUENOS AIRES — People talk a lot about the opportunities that the Chinese market represents for Argentine firms. And there are plenty of articles on the different ways our provinces might trade with Chinese provinces.

Keep in mind, though, that Chinese provincial officials are primarily interested in growth and in the profitability of Chinese firms on their turf, while in Argentina, focus on private-sector growth and profits is precisely what is missing in the agendas of many of our governors.

What kinds of opportunities, therefore, are we really talking about?

International trade, in this context, isn't just a matter of competing companies. It's a clash of "systems' rather, with each system representing a confluence of companies and governments, but also educational structures and the scientific and technological community. And leading these systems is the public sector, which is what defines the incentives involved.

What Argentine business executives ought to understand is that Chinese firms receive the attention of their respective province's highest officials, and enjoy an ecosystem that provides them internationalization services, soft financing, workforce training, subsidies to recruit talented graduates, help for innovation, help in incorporating telecom, information technologies and AI... and all the while paying 10 percentage points less in taxes on company profits.

There are numerous historical, cultural, institutional and demographic differences between Argentina and China. But there is one that is barely mentioned: Chinese provincial governments receive a percentage of the value added tax in addition to a portion of both corporate and personal incomes taxes.

The money is collected locally, in the provinces themselves, which can then use the capital to finance investments and services for their communities. And if, in the end, there is a surplus, the provinces also have discretionary spending powers. Chinese officials are not chosen by the people, but by higher authorities, and those authorities largely evaluate them on the basis of the province's economic development.

Most governors realize that their positions depend on money flowing from above and on the votes from below.

People face restrictions on their movements in China, but not firms. This simple equation helps one understand what the provincial Communist Party boss and governor need to do:

First, they try to ensure that there are many and profitable firms based in the province.

Second, they want spending to be tight, but not so tight as to deprive firms of services and prompt them to move to a neighboring province.

Third, they need to show results on the management end to ensure political promotion, and create and retain more and better firms, which will thus enhance their economic and political power.

And fourth, they must compete fiercely with other provinces to attract companies.

Everything, in other words, is geared toward development, though there is certainly corruption in the use of discretionary spending powers and funds.

In federal and democratic countries, on the other hand, votes are the big incentive behind the state's management and development decisions. Jobs depend on business dynamics, and voters know that.

But in Argentina, this incentive only works in a few provinces. Most governors realize that their positions depend on money flowing from above and on the votes from below. If, for example, they contribute 1% to pooled tax revenues and receive 3%, and bring in only a meager amount in provincial taxes, it is not in their interest to funnel resources toward development and build up more and better businesses. It has little electoral impact, and they need to think of their position in the short term.

What they do need, however, is to divide public-sector jobs and social projects to win the next elections; negotiate their presence in the National Congress and ties with the executive branch to receive funds; and finally, gather as much "discretionary" money as possible to finance their political machines.

The district mayors of Buenos Aires and its suburbs broadly follow a similar logic, though in exacerbated form as people in Argentina can freely move about, and cityward migration due to underdevelopment in the province fuels more poverty in the Buenos Aires conurbation.

When we say governors need this or that, we are not judging Chinese and Argentine governors personally. There are examples of governors who spend money on provincial development despite a lack of incentives. We are referring, rather, to the institutional framework in which they must operate.

The argument here isn't that we should copy the Chinese system, which is top-down and authoritarian. What we could do, however, is rectify our incentives system, which as it stands now, is essentially an invitation to poverty.

*The author is an economist and member of the Argentine Political Club.

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Queen Elizabeth II with UK PM Boris Johnson at a reception at Windsor Castle yesterday

Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

👋 Hej!*

Welcome to Wednesday, where chaos hits Syria, Brazilian president Jair Bolsonaro is accused of crimes against humanity and a social media giant plans to rebrand itself. For Spanish daily La Razon, reporter Paco Rodríguez takes us to the devastated town of Belchite, where visitors are reporting paranormal phenomenons.



• Syrian violence erupts: Army shelling on residential areas of the rebel-held region of northwestern Syria killed 13 people, with school children among the victims. The attack occurred shortly after a bombing killed at least 14 military personnel in Damascus. In central Syria, a blast inside an ammunition depot kills five soldiers.

• Renewed Ethiopia air raids on capital of embattled Tigray region: Ethiopian federal government forces have launched its second air strike this week on the capital of the northern Tigray. The air raids mark a sharp escalation in the near-year-old conflict between the government forces and the Tigrayan People's Liberation Front (TPLF) that killed thousands and displaced over 2 million people.

• Bolsonaro accused of crimes against humanity: A leaked draft government report concludes that Brazilian President Jair Bolsonaro should be charged with crimes against humanity, forging documents and incitement to crime, following his handling of the country's COVID-19 pandemic. The report blames Bolsonaro's administration for more than half of Brazil's 600,000 coronavirus deaths.

• Kidnappers in Haiti demand $17 million to free a missionary group: A Haitian gang that kidnapped 17 members of a Christian aid group, including five children, demanded $1million ransom per person. Most of those being held are Americans; one is Canadian.

• Putin bows out of COP26 in Glasgow: Russian President Vladimir Putin will not fly to Glasgow to attend the COP26 climate summit. A setback for host Britain's hopes of getting support from major powers for a more radical plan to tackle climate change.

• Queen Elizabeth II cancels trip over health concerns: The 95-year-old British monarch has cancelled a visit to Northern Ireland after she was advised by her doctors to rest for the next few days. Buckingham Palace assured the queen, who attended public events yesterday, was "in good spirits."

• A new name for Facebook? According to a report by The Verge website, Mark Zuckerberg's social media giant is planning on changing the company's name next week, to reflect its focus on building the "metaverse," a virtual reality version of the internet.


"Oil price rise causes earthquake," titles Portuguese daily Jornal I as surging demand coupled with supply shortage have driven oil prices to seven-year highs at more than $80 per barrel.



For the first time women judges have been appointed to Egypt's State Council, one of the country's main judicial bodies. The council's chief judge, Mohammed Hossam el-Din, welcomed the 98 new judges in a celebratory event in Cairo. Since its inception in 1946, the State Council has been exclusively male and until now actively rejected female applicants.


Spanish civil war town now a paranormal attraction

Ghosts from Spain's murderous 1930s civil war are said to roam the ruins of Belchite outside Zaragoza. Tourists are intrigued and can book a special visit to the town, reports Paco Rodríguez in Madrid-based daily La Razon.

🏚️ Between August 24 and September 6, 1937, during the Spanish Civil War, more than 5,000 people died in 14 days of intense fighting in Belchite in north-eastern Spain, and the town was flattened. The fighting began on the outskirts and ended in house-to-house fighting. Almost half the town's 3,100 residents died in the struggle. The war annihilated centuries of village history. The town was never rebuilt, though a Pueblo Nuevo (or new town) was built by the old one.

😱 Belchite became an open-air museum of the horror of the civil war of 1936-39, which left 300,000 dead and wounds that have yet to heal or, for some today, mustn't. For many locals, the battle of Belchite has yet to end, judging by reports of paranormal incidents. Some insist they have heard the screams of falling soldiers, while others say the Count of Belchite wanders the streets, unable to find a resting place after his corpse was exhumed.

🎟️ Ordinary visitors have encountered unusual situations. Currently, you can only visit Belchite at set times every day, with prior booking. More daring visitors can also visit at 10 p.m. on weekends. Your ticket does not include a guaranteed paranormal experience, but many visitors insist strange things have happened to them. These include sudden changes of temperature or the strange feeling of being observed from a street corner or a window. Furthermore, such phenomena increase as evening falls, as if night brought the devastated town to life.

➡️


We still cling to the past because back then we had security, which is the main thing that's missing in Libya today.

— Fethi al-Ahmar, an engineer living in the Libyan desert town Bani Walid, told AFP, as the country today marks the 10-year anniversary of the death of dictator Muammar Gaddafi. The leader who had reigned for 42 years over Libya was toppled in a revolt inspired by the Arab Spring uprisings and later killed by rebels. Some hope the presidential elections set in December can help the country turn the page on a decade of chaos and instability.


Iran to offer Master's and PhD in morality enforcement

Iran will create new "master's and doctorate" programs to train state morality agents checking on people's public conduct and attire, according to several Persian-language news sources.

Mehran Samadi, a senior official of the Headquarters to Enjoin Virtues and Proscribe Vices (Amr-e be ma'ruf va nahy az monkar) said "anyone who wants to enjoin virtues must have the knowledge," the London-based broadcaster Iran International reported, citing reports from Iran.

The morality patrols, in force since the 1979 revolution, tend to focus mostly on young people and women, particularly the public appearance for the latter. Loose headscarves will send women straight to a police station, often in humiliating conditions. Five years ago, the regime announced a new force of some 7,000 additional agents checking on women's hijabs and other standards of dress and behavior.

Last week, for example, Tehran police revealed that they had "disciplined" agents who had been filmed forcefully shoving a girl into a van. Such incidents may increase under the new, conservative president, Ibrahim Raisi.

Speaking about the new academic discipline, Samadi said morals go "much further than headscarves and modesty," and those earning graduate degrees would teach agents "what the priorities are."

Iran's Islamic regime, under the guidance of Shia jurists, continuously fine tunes notions of "proper" conduct — and calibrates its own, interventionist authority. More recently the traffic police chief said women were not allowed to ride motorbikes, and "would be stopped," Prague-based Radio Farda reported.

Days before, a cleric in the holy city of Qom in central Iran insisted that people must be vaccinated by a medic of the same sex "as often as possible," and if not, there should be no pictures of mixed-sex vaccinations.

✍️ Newsletter by Anne-Sophie Goninet, Jane Herbelin and Bertrand Hauger

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