Argentina: From Bad to Worse

Once a prosperous nation, for decades Argentina has been a country in semi-perpetual economic crisis. In 2015 it seemed that the voters had gained some common sense. After years of catastrophic mismanagement by the populist Peronist President Cristina Fernandez de Kirchner, (preceded by her husband who died in office), characterized by a mix of subsidies, protectionism and massive state interventions, plus a bankruptcy, the voters turned to Mauricio Macri, a pro-business moderate conservative, as the right person to turn things around, restore business confidence, and convince foreign investors to come back to Argentina.

He would fail

While there
was hope for real improvement, my Argentine friends told me from the very
beginning that Macri would fail, simply because the economic disaster he had inherited
was just too big.

Well, it turned out they were right. In hindsight, we could agree that Macri’s “gradualism”, his effort at implementing pro-market reforms a little bit at the time, was just too little too late. The truth is that his reformist policies, at least in the short and medium term, caused additional pain, (higher inflation, more unemployment), without much to show that could be seen by the voters as the proverbial light at the end of the tunnel.

Notwithstanding a gigantic International Monetary Fund loan ($ 56.3 billion) aimed at stabilizing public finances, the Argentine economy is stagnating, the currency lost value, while inflation keeps eating into modest salaries. A pretty bad record for President Macri.

Back to the old playbook

And so, what did the Argentine voters do? Well, voting recently in primaries that are an effective dress rehearsal for the actual national vote scheduled for October 27, they clobbered Macri and blessed again the Peronists, with the same Cristina Fernandez (former President) as candidate for Vice President. She is the number two in a ticket headed by Alberto Fernandez, (no relation). The winners got 48%, while Macri was humiliated with a distant 32%.

Call back the Peronists

And so, since Mauricio Macri, the new leader who was supposed to fix the country, has failed, in their wisdom, the Argentines seem keen to elect the well known old arsonists as the new Fire Department Chiefs.

Look, I appreciate that Macri did not do such a good job. But where is the evidence that going back to the old playbook that manifestly failed in a spectacular way is the best way to improve the lot of the beleaguered people of Argentina?

Financial markets share my concern. As soon as the news of Macri’s stinging political defeat came out, the Argentine stock market took a dive, while the peso lost a lot of value against the US dollar. This market collapse is not a vote of confidence in the ability of the old guard to fix the economic problems they created in the first place.

Desperation is a bad counsel

I understand the unhappy voters who decided against Macri. I also understand that desperation is often a bad counsel. However, seeking real help from the primary architects of the economic disaster that engulfed Argentina years ago is beyond wishful thinking. It is sheer stupidity.