Argentina's Road to Recovery
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Argentina’s Road to Recovery By Roger F. Noriega December 2015 KEY POINTS • Mauricio Macri, who will become Argentina’s president on December 10, is moving decisively to apply free-market solutions to restore his country’s prosperity, solvency, and global reputation. • Success of Macri’s center-right agenda could serve as an example for many Latin American countries whose statist policies have produced ailing economies and political instability. • As Argentina recovers its influence in favor of regional democracy and human rights, the United States must step forward to support these causes in the Americas. he November 22 election of Mauricio Macri, a incumbent, but many Peronists who rejected the Kirch- Tcenter-right former Buenos Aires mayor and busi- ners’ heavy-handed tactics ended up giving Macri the ness executive, as president of Argentina presents a votes he needed to win the presidency.3 pivotal opportunity to vindicate free-market economic Because the results were much closer than pre-election policies and rally democratic solidarity in the Americas. polls predicted, Macri does not have the momentum Although Argentina’s $700 billion economy is ailing, it that a landslide victory would have produced, and the remains the second largest in South America; if Macri’s Peronist opposition may bounce back quickly to block proposed reforms restore growth, jobs, and solvency, significant reforms. A successful two-term mayor, he could blaze the trail for other countries whose econ- Macri will have his political skills tested as he rallies omies have been stunted by socialist policies. And if the public, the powerful provincial governors, and he follows through on his pledge to invoke Mercosur’s moderate Peronists to rescue the country’s economy. democracy clause against Venezuela’s authoritarian The team around the president-elect has signaled his regime, Argentina could help lead the region away from intention to immediately implement a flurry of execu- the authoritarian caudillos (strong men) who have tive actions to project an image of decisiveness, energy, dominated the last decade. and change. Macri knows that he must choose his bat- After the election of Hugo Chávez in Venezuela in tles carefully—leading with measures that will broaden 1998, a mix of populism, socialism, and corruption his base rather than provoke unruly opposition. emerged under leftist leaders in Bolivia, Ecuador, El After a decade of US-Argentine relations dominated Salvador, and Nicaragua.1 Even Brazil and Chile have by the provincial and prickly Kirchners, US interests been affected by this trend. In Argentina, President in the region stand to benefit from more constructive Néstor Kirchner (2003–07) and his wife and successor leadership in Buenos Aires. If Macri is able to demon- Cristina Fernández de Kirchner (2007–15) employed strate the value of free-market policies and overcome authoritarian tactics and corruption that polarized ideological polarization, Washington may find resur- politics and stunted economic growth.2 Daniel Scioli, gent partnerships in the Americas—if the Obama Macri’s opponent and the Peronist “Front for Vic- administration chooses to pay attention. tory” candidate, tried to distance himself from the AMERICAN ENTERPRISE INSTITUTE 1 The Campaign and Election Kirchner (2003–07), he has established his own identity as the governor of the important province of Last month, Mauricio Macri became the first man in Buenos Aires (2007–15). a century from a party other than the two political bastions, the Peronist Justicialist Party and the Radical Scioli sought to rally the country’s powerful Peronist Civic Union, to win the Argentine presidency in free base by advocating continuity, with modest changes elections. His election produced a sea change in the in temperament and governing style rather than in country’s politics by rejecting the standard bearer of policies and programs; in the final debate, he accused the powerful Peronist establishment, Daniel Scioli. The Macri of planning to gut the social programs that are 8 51.4 percent to 48.6 percent result was closer than was the legacy of Peronist rule. Running with the new coa- predicted by numerous polls taken on the eve of the lition Cambiemos (Let’s Change), Macri distinguished election, exposing the country’s deep polarization over himself from Scioli (and from Kirchner) by promising the 13-year Kirchner legacy.4 a new direction for the country featuring free-market economics, fiscal responsibility, and foreign policy— In his victory speech, Macri declared, “What happened favoring reconciliation with the United States over today changes the politics of this country.”5 Indeed, close ties to Venezuela and Iran. Macri promised to the imperious governing style of the two Kirchners was implement business-friendly reforms to promote just as controversial with many voters as their faltering growth and restore investor confidence, while protect- economic program. ing many of the popular social welfare programs. The Kirchner administrations—governing from the left wing of Peronism—funded a robust welfare state by taxing the country’s productive sectors, restricted The imperious governing exports and controlled consumer prices to placate style of the two Kirchners domestic demand, imposed currency controls that suffocated commerce, defied bondholders who refused was just as controversial offers made by Argentina after its 2001 default on with many voters as their sovereign debt, manipulated economic data to mask inflation and the other failings of statist policies, and faltering economic program. aligned the country with controversial regimes in Venezuela and Iran.6 The independence of the judiciary and the media were targets of relentless attacks by the Polling shows that Argentinians are unhappy with Kirchner administrations.7 the economic repercussions of bloated public spend- For more than a decade, the wily and irascible Kirch- ing and excessive government control, but they are ners brilliantly managed their political coalition and not necessarily opposed to the policies and programs outmaneuvered their opposition. Initially, the benefits themselves. Additionally, the close election indicates of the large welfare state grown by the Kirchners sus- that many in Argentina do not trust the policies of a tained their popularity. However, the underperforming center-right candidate such as Macri, despite his mod- economy and falling commodity prices have taken their erate track record. toll. The negative economic impact of the government’s Many voters also may recall the economic and political policies has become increasingly pronounced in recent turmoil that took place under the country’s most recent years—fueling inflation, widening the deficit, weaken- non-Peronist presidents, Raúl Alfonsín (1983–89) and ing the job market, and leading to heated legal battles Fernando de la Rúa (1999–2001), both of whom were with creditors and investors. The government’s attempt forced to leave office early after public protests over to deal with these economic maladies while maintain- austerity measures. During the recent campaign, Kirch- ing its political control has begun to affect the average ner stalwarts aggressively fanned those fears, further Argentinian’s daily life. perpetuating a narrative that the right could not be 9 The shifting polls during the last six months and the trusted to govern fairly or effectively. close final results show that Argentina’s voters may Scioli did his best to paint Macri as a dangerous choice have settled for genuine but incremental change. Six for Argentina, suggesting that he would do the bidding months ago, the moderate Scioli was running well of the International Monetary Fund (IMF)—an institu- ahead of Macri, with voters opting for Peronism’s tion voters associate with unpopular austerity mea- signature brand: stability. Although Scioli’s national sures and economic collapse. Macri dismissed these political career began as vice president under Néstor AMERICAN ENTERPRISE INSTITUTE 2 attacks as a symptom of the toxic political environment critic; his dissident Frente Renovador (Renewal Front) fostered by the Kirchner administration. Instead, he holds more than 30 seats in the Chamber of Deputies. emphasized an optimistic message about reforms that President-elect Macri’s team already has indicated his would unlock the country’s economic productivity and intention to meet with Massa, as well as with Scioli, to prosperity. seek common ground on key reforms. Disillusioned Peronists and moderates in the National Congress are Apparently, in the last crucial months before the presi- likely recruits for ad hoc, issue-oriented coalitions. dential elections, Macri’s campaign did a more effective job convincing voters of his moderation than Scioli’s One of Macri’s most crucial challenges will be winning did touting his independence from Kirchner. Ulti- the public’s confidence. In his acceptance speech, he mately, the Argentine electorate, weary of the economic recognized that many Argentinians remain skeptical of stagnation and the authoritarian tactics and corruption his policies, and he promised to “work night and day” of President Kirchner and her inner circle, opted for to win their confidence.12 This will be crucial, because the authentic change Macri offered. jump-starting Argentina’s economy and bringing its fiscal crisis under control will require tough decisions, including cuts to a bloated social-welfare state. The Rocky Road Ahead Argentina’s new president