Tuesday, September 21, 2021

OPINION AND ANALYSIS | 30-11-2019 09:37

Alberto’s dilemma: Is this 2001 or 2003?

The line is classic 2003. Néstor would tell anybody who would listen back then that “dead debtors don’t pay,” in what was a neat strategy to negotiate better terms for the country’s defaulted situation.

For almost a decade now, Argentina has been an accident waiting to happen. Only that the accident has not happened yet, or maybe it has happened, but only in slow-motion instalments.

On Tuesday the INDEC national statistics bureau reported that the economy shrank by 2.1 percent in September. This means the country’s output has now gone back to the levels it registered in 2010, when Argentina marked its first bicentennial with massive street celebrations. The country will continue to be in recession next year, according to all forecasts, and can only hope to start growing timidly, if things go well, in the last quarter of 2020.

This is not a great outlook for the incoming administration, which will nonetheless throw a party in the Plaza de Mayo to mark Alberto Fernández’s inauguration on December 10. Is there much to celebrate? Argentines might want to give their new president the benefit of the doubt, at least for a while. How long they give him remains one of the most crucial questions in Argentine politics.

The president-elect, meanwhile, is finalising his Cabinet, which he will only announce officially four days before taking office and a day before the outgoing president, Mauricio Macri, holds his own farewell party in the same famous square next Saturday, on December 7. Given the political system’s inclination to celebrate – be it an arrival to or an exit from office – it is unclear if they truly understand the magnitude of the crisis facing the country, or the potential local implications of a wave of discontent that is sweeping the region, from Colombia to Chile to Bolivia.

So far, Fernández seems to be acting on the assumption that most of the things he’ll face resemble those he faced before, when he served as Cabinet chief to former president Néstor Kirchner (2003-2007). When Kirchner first took office, the country was just walking out of a US$100 billion debt default declared in late 2001, which was followed by a devaluation of some 400 percent and a confiscation of bank deposits. Most of the dirty work of that massive crisis was led by a caretaker leader, Eduardo Duhalde, who ran Argentina for just over a year under a congressional mandate. Fernández met with the 78-year-old seasoned Peronist leader this week and said about him that “if we ever make a statue of a fireman, it would have Duhalde’s face on it, because he is the man who took the country out of the blaze and cleared the way for us to grow again.”

Of course, this is not what Alberto Fernández said about Duhalde back in 2005, when the Kirchners went out to trounce the old caudillo in midterm elections in order to claim full control of the Peronist party. But beyond the toing and fro-ing of party politics, Duhalde also had a set of public recommendations for Fernández. “The IMF should not be a problem for the next government. We just can’t pay them right now and they know it. And when you can’t pay, you just don’t pay, like it happened to me [back in 2002].”

A day earlier, Fernández had said that he would not seek the outstanding funds dedicated for Buenos Aires under the US$57 billion stand-by agreement that Macri signed with the IMF in 2018. Under the terms of that agreement, if Argentina met a series of fiscal goals, the country would have access to US$11 billion pending disbursement. But Fernández says he does not want the money because “debt is a major part of our problems, and we will not resolve them with more debt.”

The line is classic 2003. Néstor would tell anybody who would listen back then that “dead debtors don’t pay,” in what was a neat strategy to negotiate better terms for the country’s defaulted situation. A major difference between then and now, however, is that – despite a compulsory reprofiling of certain debt – Argentina is not in a default just yet. Fernández actually said at a business conference on Thursday that Argentina is already “at the bottom of the well.” But believing this is a post-Duhalde 2003 country could imply a mayor miscalculation: President Alberto Fernández might end up being the firefighter instead.

The complications he has faced in picking an economy minister for his future government might well be linked to that. Of all the many portfolios the next administration will have – which are being evenly distributed among the several Peronist factions that take part in Fernández’s coalition – the economy ministry is the hot potato many are hoping to avoid, at least for the start of the coming government. Most keen observers know Duhalde’s first economy minister was ejected only four months into the job – not to mention that Duhalde himself had barely any political afterlife.

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Marcelo J. Garcia

Marcelo J. Garcia


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