Argentina’s new President Mauricio Macri hit the ground running after being elected on a center-right platform that promised to fix Argentina’s foundering economy.
Macri’s victory ended 15 years of the statist and authoritarian policies of the outgoing president Cristina Fernández de Kirchner and her successor and late husband, Nestor. “Kirchnerism” bred corruption, inflation, and economic uncertainty. With barely a week in office under his belt, Macri is making tough decisions that may cause short-term pain while jump-starting economic growth.
Argentina’s President Mauricio Macri waves after being sworn-in to office at the Argentine Congress in Buenos Aires, Argentina, December 10, 2015. REUTERS/Andres Stapff.
Macri this week lifted currency controls that were artificially propping up the peso, a key step in attracting investors to Argentina and combatting inflation. He also lifted export taxes on crops that led farmers to hoard soybeans and other grains. Finance Minister Alfonso Prat-Gay announced the news saying, “We have reached an agreement with grain exporters that, starting tomorrow, will bring in $400 million a day over three weeks,” totaling $6 billion in revenue in three weeks. These measures have been hailed by investors and should attract capital to the cash-strapped country as Macri follows through on his market-friendly agenda.
I expressed my optimism over the positive effect of Macri’s platform in my recent testimony before the House Subcommittee on the Western Hemisphere, and in my December AEI Research paper entitled, “Argentina’s Road to Recovery.” However, I also warned about the challenges the incoming administration faces.
“Polling shows that Argentinians are unhappy with the economic repercussions of bloated public spending and excessive government control,” I explained in my report, “but they are not necessarily opposed to the policies and programs themselves. The close election also indicates that many in Argentina do not trust the policies of a center-right leader such as Macri, despite his moderate track record.”
Moreover, Macri’s coalition does not have a working majority in either chamber of the National Congress. Although the presidency provides Macri with significant power over economic policy, as he moves toward adopting more substantive reforms, his administration will have to work with congressmen from opposition parties and blocs to pass legislation.
These challenges are formidable, but by no means insurmountable. Macri’s predecessor was a particularly divisive figure who alienated her party’s moderates. Some of these disillusioned Peronists may work with Macri to salvage Argentina’s economy and global reputation — but they may keep their distance until his early measures produce results.
After a decade of US-Argentine relations dominated by the provincial and prickly Kirchners, US interests in the region stand to benefit from more constructive leadership in Buenos Aires. If Macri is able to demonstrate the value of free-market policies and overcome ideological polarization, he has the opportunity to change the political landscape in Argentina as well as influence a centrist trend in Latin America.
As I testified last week, the full potential of this opportunity will only be realized if Washington seeks ways to expand trade and regional cooperation.
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