By Colin Vaida
Argentina often heralded for its once in a generation soccer stars, is also South America’s second largest economy. Argentina ranks in the top fifty for human development, is considered a high-income economy by the World Bank, and maintains one of the lowest GINI coefficients in South America. However, since its 1983 return to democracy Argentina has been an economic headache, wracked with instability, high debt, and a fledgling currency. The country’s economic foibles have made Argentina a pariah in international relations, economics, and finance. Argentina’s ongoing elections for president have reignited a continual debate regarding the country’s future and a path to stability.
For the last twelve years, Argentina has been governed by the political duo of Cristina Fernández de Krichner and her late husband Néstor. The duo’s political tenure has been defined by the concentration of political power, far-reaching welfare programs, curbing of the press, and Argentine nationalism. Together, the husband-wife powerhouse has seen their political strategy and tactics labeled “Kirchnerismo,” a la the 1950s era politics of Peronismo. With an end in sight to the Kirchner regime, at least in name, many are looking for what’s next in Argentine politics. Argentina’s rising inflation, debt defaults, currency controls, massive export taxes, and stagnant growth, all point toward electing business-minded Mauricio Macri. He has been an outspoken critic of the Kirchners and has demanded a refocusing of Argentina’s priorities and polices. As the outgoing mayor of Buenos Aires, Mauricio Macri has run on a platform for change, but his perceived representation of the wealthy elite and business interests have his campaign worried. Macri’s platform evokes in many the memory of Argentina’s president in the 1990s, Carlos Menem.
Initially, under Menem, Argentina was able to stabilize its out of control inflation of the 1980s. Menem’s neoliberal economic reforms, his push for privatization, and a boom in commodity prices enticed international investment. However, the country failed to address the bloated fiscal policy that continued to balloon the country’s debt. The financial crises of the late 1990s sent the Argentine economy spinning and left the country saddled with massive debt. Argentina, despite adhering to the wave of structural adjustment and the Washington Consensus, was left crippled unable to pay back its debts. The legacy of this debt continues to live on in 2015, as U.S.-based vulture funds continue to sue Argentina. The result has been an imposition on the country’s sovereignty and has left Argentines with a bitter taste in their mouth. Macri’s call to shift away from Kirchnerismo and the political duo that carried Argentina out of this economic mess is wrapped up in a painful history. In light of this history, Macri has pushed more toward the center as the general election approaches in order to appeal to a broad base of anti-Kirchner sentiment.
Opposite Macri is Daniel Scioli, the candidate from Cristina’s party. Scioli despite being an independent and strong candidate has come to represent a vote for the continuation of Kirchnerismo with some modest changes. However, the policies of the Kirchner regime have not been all that successful. For example, export tariffs and currency controls have left Argentina’s commodity driven economy in a tough position. Beef and wheat exporters continue to struggle due to Kirchner’s policies. For consumers, prices on imported goods continue to be outrageously expensive. Inflation is on the rise and economic growth numbers are not promising (0.5% in 2014). Economic statistic reporting, including inflation reporting, continues to be wildly inaccurate, and purposefully so. Though the Kirchner regime has been wildly popular due to its strident responses to debt default, its economic policies are not working. Scioli’s promise of a slight tweak may not be enough for Argentina to regain its ground.
Solutions to Argentina’s economic instability seem difficult to find in the current climate. The combination of political memory with tough economic choices leaves the next President in a political and economic quagmire. There is no easy way out of Argentina’s debt situation, rising inflation, and slow growth. Clearly, the policies of Kirchner in the current economic climate are not working, but the liberalization of the economy is rightfully a nonstarter with the Argentine people. The time to find a tenable solution seems implausible in the current climate. The temptation to keep policies static will be high for the next president, and making change will certainly come with a loss of political capital.
Featured Image Source Reuters