November 24, 2015
Fortune, November 24, 2015
Huffpost Voces, November 30, 2015
Huffington Post, November 24, 2015
The election of right-wing candidate Mauricio Macri as Argentina’s president on Sunday, which just a few months ago was unexpected, is a setback for Argentina and for the region. In the last 13 years, Argentina had made enormous economic and social progress. Under the Kirchners (first Néstor and then Cristina Fernández de Kirchner), poverty fell by about 70 percent, and extreme poverty by 80 percent. (This is for 2003 to mid-2013, the last year for which independent estimates are available; they are also based on independent estimates of inflation.) Unemployment fell from more than 17.2 percent to 6.9 percent , according to the IMF.
But Daniel Scioli, the candidate of the Peronist “Front for Victory”, who represented the governing coalition including President Fernández, did not do a good job defending these achievements. He also didn’t seem to make clear what he would do to fix the country’s current economic problems. In the past four years, growth has been slow (averaging about 1.1 percent annually), inflation has been high (with private estimates in the 20s), and a black market for the dollar has developed. This gave Macri (and his “Cambiemos” or “Let’s Change” coalition) an opening to present himself as the candidate of a better future.
With skilled marketing help from an Ecuadorean public relations firm, he also succeeded in defining himself as something far more moderate than he is likely to be, thus winning over voters who might otherwise be afraid of a return to the pre-Kirchner depression years.
Some of the things he has indicated he would do could have a positive impact, if done correctly. He will likely cut a deal with vulture funds who have been holding more than 90 percent of Argentina’s creditors hostage since New York judge Thomas Griesa ruled in 2014 that the government is not allowed to pay them. If the cost is not too high, it could be a net positive by re-opening a path for Argentina to return to international borrowing — something that Scioli would likely have also done.
A liberalization of the exchange rate that got rid of the black market could be a big step forward. But much depends on how it is done: If it causes inflation to spike and the government does nothing to protect poor and working people, they could lose a lot.
Macri may also take measures to bring down inflation, which is something that needs to be done. But here especially there are great dangers, because he is likely to do so by shrinking the economy. He wants to reduce the central government budget deficit, which will grow as a percent of GDP with austerity. Given his ideology and politics, there is serious risk of a downward spiral of austerity and recession, as the country suffered from 1998-2001. If there is inflation from the devaluation, and they are eager to get rid of that too, this could make matters worse.
His campaign statements and positions indicate that he is against a government role in promoting industry, so the country’s development is likely to suffer as a result. He has proposed tax cuts for upper- income groups, and so budget cuts are likely since he has pledged to reduce the government budget deficit. If you add it all up, the majority of Argentines are likely to suffer from any economic transition that he can engineer.
But he will not have a working majority in Congress, so it remains to be seen how much he can do. Internationally, he has moved immediately to demonstrate his overwhelming loyalty to the United States government, which had been previously demonstrated in confidential U.S. embassy cables published by WikiLeaks. One of his very first statements after being elected was to denounce Venezuela and threaten to have them suspended from Mercosur. Since this is not an issue that was pressing to Argentine voters, it is clear that it is part of the U.S.-led international campaign leading up to Venezuela’s December 6 elections, which seeks to delegitimize the government and the elections.
Macri’s willingness to join this campaign is something that no other South American president would do. On the contrary, in the past decade South American presidents have repeatedly joined together to defend democracy in the region when it was under attack, with Washington on the other side — not only in Venezuela, in 2014, 2013, and 2002; but in but in Bolivia (2008); Honduras (2009); Ecuador (2010); and Paraguay (2012). If Macri continues down this road, he will not only bring shame to Argentina, but he will damage hemispheric relations.
Washington has maintained a policy of “rollback” and “containment” against almost all of the left governments that have won elections in the 21st century. So there is quite a bit of excitement here among the business and foreign policy elite, with Brazil’s President Dilma Rousseff facing a recession and political crisis, and Venezuela’s Chavismo confronting an economic crisis and possible loss of its first national election in 17 years. So naturally they are happy about this unprecedented right-wing electoral victory in Argentina. Articles are already sprouting up, welcoming the long-awaited demise of the Latin American left.
But reports of this demise, to paraphrase Mark Twain, are somewhat exaggerated. A more likely outcome is like that of Chile, where a lackluster candidate was unable to take advantage of Socialist Party President Michelle Bachelet’s 80 percent approval rating, and lost to a right-wing billionaire in 2010. He lasted four years, and then the country went back to Bachelet.
Argentina and the region have changed too much over the past 15 years to return to the neoliberal, neocolonial past. The Washington foreign policy establishment may not understand this, but Macri’s handlers did. That’s why they took the trouble to package him as something very different from what he is.
Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. and president of Just Foreign Policy. He is also the author of the new book “Failed: What the ‘Experts’ Got Wrong About the Global Economy” (Oxford University Press, 2015).