Argentina Economy Minister announces Ukraine war windfall fund

Argentina's government on Monday announced a new bonus for low-income workers and the retired, funded by a tax on "unexpected" economic gains resulting from the rise in international commodity prices following Russia's invasion of Ukraine.

Payments to the country's poorest citizens would help them cope with rising inflation, Economy Minister Martín Guzmán said on Monday, declaring that the tax on "unexpected income" would be turned into a bonus for those who need it most.

The minister said that unregistered workers and some self-employed would receive up to 18,000 pesos split into two payments and that retirees will receive 12,000 pesos in a one-off sum.

"We are looking to build a mechanism to ensure that the shock of the war does not have a regressive effect on our society, an unequal impact," said Guzmán, as he delivered a speech alongside President Alberto Fernández at the Casa Rosada.

"In the coming weeks we are going to convene the productive forces to work on the construction of this mechanism to capture the unexpected income," he added.

The official gave no indication of how much money could be raised by the government's proposals.

Companies with annual net taxable profits of more than one billion pesos (close to US$8.5 million) would contribute to the fund, a group that Guzmán said represents "a very small fraction of the country's business network."

The minister said that in 2021, only 3.2 percent of firms in Argentina had that level of profits.

The economic sectors that have benefited the most from the Ukraine war are producers and exporters of cereals and grains, such as wheat and maize.

Another condition for contributing to the fund is that companies register "a significant increase in profits" in 2022, said Guzmán.

In addition, it will be established that if their windfall income is channelled into productive investment, a firm's contribution could be lower.

"The aim is to capture this income in order to be able to carry out the role of the state in tackling problems and achieving greater social inclusion," Guzmán explained.

The government did not provide financial details or estimates about the fund. The proposal would also need approval from Congress.

President's Fernández's government is facing high inflation, which totalled 16.1 percent in the first quarter alone. Price hikes are wreaking havoc for Argentines, overshadowing the impact of economic growth and improved employment data.

Guzmán attributed the new spike in inflation, which reached 50.9 percent in 2021, to "the unprecedented shock of the pandemic and now the war," which he said had particularly affected food and fuel prices.

The minister said that the one-time sum of 18,000 pesos (US$152) would be for informal and unregistered workers, some self-employed and domestic staff (Category A and B), while the 12,000-peso (US$101) payment would reach retirees.

For formal workers, the government is promoting salary talks between companies and unions to prevent the loss of purchasing power, he said.

"The impact of inflation" should not be felt "in the pockets of the most vulnerable sectors of the popular economy," said Fernández, who said the payments would help to alleviate the pain of price increases."We must continue to improve income redistribution," he added, confirming his commitment to "progressive measures."