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OPINION AND ANALYSIS | 20-01-2018 17:43

The End of the Pax Macrista

The beginning of Mauricio Macri’s third year as president appears to have marked the end of the Pax Macrista, as once domesticated union leaders promise to wage war on ruling coalition and its ambitious labour reform.

The Pax Romana marks the period established by Augustus, who was Julius Caesar’s appointed successor, in 31 BC after roughly 200 years of uninterrupted war, both foreign and domestic. Gaius Octavius, then anointed Augustus Caesar, ended years of bloody civil war after defeating Mark Antony and Cleopatra in the Battle of Actium, marking the end of the Roman Republic and giving way to the Empire. This period of relative peace would last nearly to the end of the second century, when the philosopher-emperor Marcus Aurelius’ death gave Commodus, his violent son, the reigns of the Empire. From then on, it would all go downhill for the Romans, who ruled the world for 1,000 years.

The beginning of Mauricio Macri’s third year as president appears to have marked the end of the Pax Macrista, as once domesticated union leaders promise to wage war on ruling coalition Cambiemos’ (Let’s Change) ambitious labour reform. These union leaders, informally led by the eternal Hugo Moyano, had remained ominously calm throughout the first two years of Macri’s presidency, in an apparent truce that guaranteed governability. It was, instead, leftist parties and Senator Cristina Fernández de Kirchner’s troupe that took on the role  of trying to destabilise the government, with mixed results.

Throughout the first half of 2017, CFK played mystery regarding her potential candidacy for a Senate seat in Buenos Aires province, as the polls saw her rising to the point where she challenged Cambiemos’ territorial strength in the most important electoral district in the country. Taking a page from Macri’s star adviser, Jaime Duran Barba, Cristina’s “silent campaign” put her several points ahead of Esteban Bullrich, the little-known candidate chosen by Cambiemos’ rising star, Buenos Aires Province Governor María Eugenia Vidal. 
The former president’s perceived electoral strength wreaked havoc on Macri’s plans, causing the US dollar exchange rate to shoot up and forcing the intervention of the Central Bank, pushing the president and Vidal onto the campaign trail. Cristina’s razor-thin victory in the PASO primaries, along with Cambiemos’ nationwide victory in the actual election — which included Bullrich’s triumph in the so-called “mother of all battles” — settled the waters, giving the Macri administration a powerful dose of political capital that guaranteed peace in the streets and the markets.

Having solidified their power, Macri and Cabinet Chief Marcos Peña doubled down, calling on Congress to meet for extraordinary sessions to pass a controversial reform package that included the reforma previsional, which effectively lowered disbursements for pensioners and retirees. That’s when the first chinks in Cambiemos’ armour became apparent. With violent clashes in the heavily fortified streets quickly becoming all out repression by federal security forces — including the tarnished Gendarmerie (Border Guard) — the ruling coalition was unable to sustain quorum and was forced to call off the session. Facing a painful political defeat, Macri and Peña inked a deal with opposition governors and strong-armed the law through the Chamber of Deputies, after threatening to sidestep Congress via presidential decree.

Then came a self-inflicted wound. Early on the Día de los Inocente (our  April Fools’ Day), Macri’s economic team trampled all over Central Bank President Federico Sturzenegger and the institution’s alleged autarky, announcing an increase to 2018’s inflation targets only hours after having the Senate approve the year’s budget. “Feliz #DiaDeLosInocentes para todos…y todas” tweeted out @CFKArgentina, as inflation expectations and the dollar — one of Argentina’s most accurate indicators of instability — went on a tear. Failing to acknowledge the value of an independent central bank and Sturzenegger’s use of communication as a monetary policy tool, Macri, Peña severely damaged credibility in the institution leading the battle against runaway inflation, one of the pillars of their successful electoral campaign promises.

The fateful “December Fools’” press conference revealed the executive power’s growing authoritativeness, already evident in their aggressive congressional tactics seen during preceding weeks. It also showed the government to be extremely pragmatic, sacrificing inflation for growth and thus contradicting their self-proclaimed image as champions of “truth,” obsessed with “method” rather than outcome and putting the “team” first. Cross Macri — or Marcos Peña — and suffer the consequences.

Cambiemos’ third fall appears as their final rift with Argentina’s union strongman, Hugo Moyano. On Thursday, the leader of Camioneros (the truckers’ union) finally appeared at a public lunch alongside the powerful Luis Barrionuevo (head of the food service workers’ union) and other strong sindicalistas. They blasted the government’s incapacity to control inflation and reduce poverty while making it clear that the union movement is ready for mass protests and strikes. Only a week before, the Macri administration had passed a sweeping presidential decree that repealed 19 laws and modified another 140. Included were changes to labour laws, adding to speculation that Macri could move on with the reform by decree after having pushed back its congressional debate from February to March.

The Pax Macrista wasn’t free. Cambiemos has expanded its spending on social plans since taking power while reaching deals with governors — particularly non-Kirchnerite Peronists — that guarantee fresh funds from the central government. In wage negotiations, it appeased Moyano and the Camioneros in 2016 and 2017 with 37 percent and 25 percent increases respectively. All of this, along with a record balance of trade deficit in 2017, makes the challenge of closing the fiscal deficit highly unlikely. Instead, Macri’s team has relied on international indebtedness, which still has room to grow after the Kirchners’ incapacity to borrow from foreign creditors. Thus, the deficit is financed with debt rather than inflation, leaving Argentina once again in the difficult position of facing rising interest payments.

While Argentina’s economy is on the path to recovery, it is still in a complicated situation where multiple moving parts could destabilise Macri’s project. The president needs to work on both political capital and economic predictability, he must keep the moderate opposition content while delivering on inflation and growth. It’s not an easy task, but Rome wasn’t built in a day.

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Agustino Fontevecchia

Agustino Fontevecchia

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