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OPINION AND ANALYSIS | 31-08-2019 01:07

Something unpleasant is coming our way

If Alberto Fernández does win office in October, his government will have to choose between setting off a hyperinflationary firestorm and undertaking a fiscal squeeze every bit as ferocious as was applied in 2002.

Encouraged by the spontaneous show of support he received just over a week ago, Mauricio Macri – who until that Saturday night seemed to be about to throw in the towel – says he is determined to fight to the end. Battered and bruised as he no doubt is by the blows that have been rained upon him, he hopes against hope that the electorate, properly alarmed by the way the financial markets reacted to the primary poll results and by the loutish behaviour of many Kirchnerites and their allies, will somehow deny Alberto Fernández the 45 percent of the votes he would need to avoid a run-off. Macri is apparently convinced that should one be necessary he could come out on top.

This may be an illusion. A large proportion of the country’s inhabitants evidently believes he is wholly responsible for the latest phase of an economic crisis that began almost a century ago and would dearly like to see him knocked clean out of the ring.

And then? Few seem to have given much thought to what would be in store for them should, as now looks likely, the Kirchnerites return to their old stamping-grounds and make the most of an opportunity to avenge what their leader, Cristina Fernández de Kirchner, took for such an intolerable insult that she refused to hand the incoming president the symbols of his office. In any case, disappointing as Macri’s performance may have been in the eyes of those who think any decent president should be able to make the economy meet their expectations, there was never any reason to think that a Kirchnerite government under Daniel Scioli – the man he defeated by a narrow margin in 2015 – would have done any better.

Quite the contrary; as it would have had to look for a way to prevent living standards from nose-diving without the foreign money that enabled Macri to soften the relatively mild measures he applied in an effort to keep the country afloat, the results of its efforts would have been a good deal worse.

Macri took over when the country was fast approaching a cliff. Tough-minded “neoliberals” – like the presidential candidate José Luis Espert – may think that had it plunged over people would have been taught a salutary lesson, but they underestimate the ability of individuals who cling to anti-capitalist ideologies, as many on the wilder fringes of the Peronist movement certainly do, to keep power when the local economy is falling into pieces. Nicolás Maduro still holds the whip hand in Venezuela even though almost all that unfortunate country’s remaining inhabitants go hungry to bed.

For more years than most of us can remember, Argentine politicians – who by and large are a remarkably conservative lot with their heads stuck in the 19th century – have endeavoured to keep the populace happy by printing huge amounts of money or borrowing astronomical quantities of it in the hope that, somehow or other, the country’s outdated economy would finally start working as they imagined it ought to. Most are dead against the “structural reforms” recommended by outsiders who point out that, unless productivity is greatly increased and investment doubles or triples, Argentina will continue to lag further and further behind countries whose leaders take such matters seriously.

Though an increasing number of politicians and commentators say they are aware that the old corporative model is no longer viable, that does not mean many are willing to support attempts to replace it with something capable of surviving in a highly competitive world. Most want to see per capita incomes skyrocket while keeping things more or less as they are.

However, as all but the most doltish appreciate, churning out peso bills or their electronic equivalents leads straight to hyperinflation, so that traditional expedient is out, and borrowing money leads to ever-growing debts the country cannot afford to repay, so that too is about to become a non-starter. Thanks to Donald Trump, who leans on the International Monetary Fund to make it do what it can to help his friend Mauricio, the current government can still get its fingers on cash from abroad, but such is the reputation acquired by the Kirchnerites when they were in office that hardly anyone would be willing to lend them a single penny.

So if, as is widely expected, Alberto Fernández does win office in October, his government will have to choose between setting off a hyperinflationary firestorm and undertaking a fiscal squeeze every bit as ferocious as was applied in 2002 by his fellow Peronist Eduardo Duhalde. To make the situation even direr, a commodity boom – like the one that allowed Néstor Kirchner to consolidate his power – would be nowhere in sight. For the foreseeable future Argentina would have to depend almost exclusively on her own resources.

Prospects are therefore grim, especially for the men and women who live in shantytowns and can be relied on to provide the Kirchnerites with the millions of votes they need to stay in business. If more people understood that, even if Alberto is the benevolent genius he thinks he is, from his first day in office he would suffer many crippling disadvantages because of what his cronies have done many times in the past, Macri would be in with a chance, but he and the people surrounding him are reluctant to get the message across because they know that, as well as frightening people who are already on the edge, it would make the markets even more nervous than they have been of late.

The soft approach to the challenges they face, which is favoured by Macri and his supporters, could change in the coming weeks. The tens of thousands of people who took to the streets to give vent to their feelings about what could be coming their way has persuaded some that, given the circumstances, a local edition of “project fear” would be fully justified.

As well as taking it for granted that a new Kirchnerite administration would make a miserable mess of what is left of the economy, they assume that it would be every bit as corrupt as was the last one.

That it would be liable to trample on civil liberties and would be certain to show scant respect for freedom of expression. Macri and most of his teammates would prefer not to hammer this ugly message home, but unless they manage to do so, the country will soon find itself in the hands of individuals whose attachment to democracy is, shall we say, less than enthusiastic, and whose ability to cause an enormous amount of harm should not be underestimated.

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James Neilson

James Neilson

Former editor of the Buenos Aires Herald (1979-1986).


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