Given United States President Donald Trump’s apparent reluctance to attend April’s Summit of the Americas in Peru (a country just blessed with a papal visit), Dr Hale is impressed by President Mauricio Macri’s early start to globetrotting in this year of Argentina’s G20 chairmanship. He writes from New England:
“Here we have now entered into the second year of the Trump presidency with the first anniversary of his inauguration last weekend and much written on the subject. I myself find the whole thing overrated – rather than fire and fury, Trump is more like sound and fury signifying nothing. For example, all that protectionist bluster and the US trade deficit goes shooting up. I see Trump as a libertarian experiment – since you cannot just abolish government without crossing over into anarchism, rather than vote the proverbial donkey into the White House you create the presidential vacuum by installing this clown as the elephant in the room. And at least in economic terms, it has not been that unsuccessful an experiment thus far – even if the federal budget is at a standstill.
“But enough about the States – the aim of these communications with you is to garner information about Argentina. Glad to see that your president is no isolationist like The Donald – putting on his hat as this year’s G20 president, he’s devoted this week to the overseas destinations of Russia, Switzerland (Davos) and France. What can you tell me about Macri’s European swing and what has been going on in Argentina in the last full week of the prime holiday month while the cat’s away?”
My reply:
“I’m afraid I’m going to play my usual trick of postponing comment on Macri’s trip until it is fully over with his safe return on the grounds that I need to see the complete package. The presidential surnames in Russia and France both lend themselves to cheap jokes here but we won’t go down that road. Yet there are two preliminary comments I’d like to make.
“Firstly (and here I’m being absolutely serious), the G20 summit may be a big news milestone for 2018 but so is the World Cup in Russia and who could deny that the latter is much bigger in most eyes? The G20 might account for 85 percent of the global economy, 80 percent of world trade and two-thirds of humanity etc. but these impressive percentages dwindle considerably if the heavyweight club is gauged strictly according to the perspective of the World Cup fan. A mere half of these powerhouses (or 11 of the 20, to be exact) have qualified for Russia – how can an ardent Argentine football fan possibly respect such a mediocre performance? A real image problem.
“Secondly, I don’t know whether Macri has a one-track mind or whether he is the victim of lazy press headlines but this obsessive pursuit of investments reportedly permeating his tour is not in keeping with the dignity expected of a G20 chair. The summit helm should be an active global player advancing constructive proposals across a broad front to improve the world economic order, not a passive receptacle for investments. In the spirit of the late John F. Kennedy, ‘ask not what the G20 can do for you but what you can do for the G20.’
“And what has been going on back here meanwhile? No real change of trend – thus interest rates and inflation continue to move in opposite directions, in defiance of the monetarist orthodoxy so dear to Central Bank Governor Federico Sturzenegger (this column’s main subject a fortnight ago). The only way out of this contradiction for Sturzenegger is to argue that interest rates are so unprecedentedly ahead of prices in real terms that he still enjoys a margin to narrow the spread, even if inflation accelerated to 3.1 percent last month in the wake of sharply increased utility billing to slash subsidies. The latter hikes look set to continue in this non-electoral year, which might well make any inflation-targeting premature until the correction of relative prices is complete – the so-called ‘core inflation’ cannot be compartmentalised from this process so neatly as some Central Bank economists might like to think. The government also has the 2018 collective bargaining season still lying ahead of it with its 15-percent wage cap crumbling fast and every danger of wage-push inflation.
“Inflation as the price of growth is a chronic Argentine equation (and fallacy) but it might well be that the economic policy-makers are not so much showing more indulgence toward inflation as trying to ease the dollar out of its recent paralysis – a paralysis lethal to the competitive performance of regional economies and small and medium-sized companies (PyMEs) in particular – as it edges ever closer to the 20-peso mark. Pushing up the dollar is never a risk-free policy in Argentina but the priority is growth – also the key to shrinking the fiscal deficit as a percentage of the economy without cutting public spending.
“On Tuesday the 2017 trade deficit was finally quantified by INDEC statistics bureau – below US$8.5 billion (US$8.47 billion) rather than around US$9 billion as widely feared, but still a record in nominal terms (and the highest in relative terms at 1.5 percent of gross domestic product since 1998 when it was 1.7 percent of GDP). Exports nudged up by less than one percent (thus underlining the problem of a competitive exchange rate) while imports surged by almost 20 percent.
“But at least Macri coupled his incessant investment pleas with a trade objective in Tuesday’s meeting with Russian President Vladimir Putin, calling for the bilateral trade volume to be doubled – curiously enough, Argentina and Russia are among the very few countries in the world self-sufficient enough in resources to have the option of living off their own without trade, even if both would be very much the poorer for it. Even though only seven weeks away from elections, Putin seemed pretty relaxed – enjoying around 80 percent support in the opinion polls, his chances of re-election look almost as good as those of Venezuela’s Nicolás Maduro (and presumably better than Trump’s).
“Last and undoubtedly least, Macri’s choice of countries this week was impeccable according to the aforementioned World Cup yardstick – hosts Russia, Switzerland and France have all qualified for June.”
(*) Michael Soltys, who first entered the Buenos Aires Herald in 1983, held various editorial posts at the newspaper from 1990 and was the lead writer of the publication’s editorials from 1987 until 2017.
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