Argentina’s Fresh Start

Andrés Velasco

BUENOS AIRES – For the last 99 years, the presidency of Argentina has rotated between Peronists – Juan Domingo Perón and his populist followers – and reactionary generals. Every so often, centrists from the Radical Civic Union were voted into office, but their terms ended quickly, in resignations or coups.

In Sunday’s election, Argentina’s voters broke the pattern: for the first time in almost a century, the president will not be a Peronist, a Radical, or an army general. It is difficult to overstate the significance of the occasion. According to Héctor Schamis, a political scientist at Georgetown University, if a similar political change had occurred in France or Brazil, the country’s citizens would be celebrating the birth of a new republic.

Argentina’s new president-elect, Mauricio Macri, an engineer by training, is often described in the international press as “center-right.” But that label is not quite correct. In Argentina, the left-right divide has been blurred by the policies of the hydra-headed Perónist Justicialist Party, which privatized state companies in the 1990s, only to re-nationalize them later. Moreover, “center-right” often means “conservative,” and Macri’s victory will not “conserve” the status quo.

Macri is best described as a “liberal” – in the European sense of the word. That means, first of all, respect for Argentina’s democratic institutions, badly damaged after a decade of rough handling by Presidents Néstor and Cristina Kirchner. It also means more market-friendly economic policy.

One of Macri’s early post-election proclamations was that he wants a “developmentalist” as finance minister. In Latin America, that means an economist who worries about growth, employment, and exports, as well as about balancing the budget and paying debts. Macri will phase out, albeit gradually, the stringent price and capital controls favored by the Peronists. And his trade and industry minister is unlikely to repeat the antics of a recent predecessor, who placed a gun on the table while negotiating import and export quotas with local producers.

And yet, the world should not expect free-market zealotry from Macri. He heads a broad coalition that includes his own liberal-minded Republican Proposal Party, the center-left Radical Civic Union, and other centrist groupings. The coalition will not command a majority in either house of Congress, so legislating will require fashioning temporary ad hoc alliances.

During the campaign, Macri displayed a sensitive political ear. He understood that Argentines were tired of the Kirchners’ imperious (one might even say authoritarian) political style, whereby anyone who disagreed with them was branded a lackey of dark imperialist forces. Even for a country with a political history as tumultuous as Argentina’s, partisan polarization and vitriol had reached levels that seemed extreme.

The contrast was striking even on Macri’s first day as president-elect. Unlike Cristina Kirchner, who gave long-winded speeches but held no press conferences and took no questions from journalists, Macri answered queries until reporters had none left. Expect more of that.

As President, Macri will inherit a dire economic situation. The economy is shrinking. Inflation is above 20% (no one is sure by how much, because the figures have been doctored). The peso is overvalued. International reserves are dwindling quickly. And the budget deficit has reached 7% of GDP. Some adjustment is inevitable.

Fortunately, there is also some good news. The current account is roughly in balance, so there is no need for further import compression. And because no one would lend to Argentina after it defaulted in the early 2000s, the government has relatively little debt. By allowing the peso to depreciate, Macri could achieve two goals at once. A weaker currency would stimulate exports and allow imports to grow as foreign-exchange controls are lifted. Meanwhile, because a significant share of government revenues are dollar-linked, while its expenditures are mostly in pesos, devaluation would reduce the budget deficit.

Macri’s honeymoon is likely to be brief; the Peronist opposition, having rid itself of the Kirchners, will not hesitate to attack the new administration. But if he uses his political capital wisely, he has a good chance of stabilizing the economy while retaining reasonable levels of political support.

That would change the political outlook not only in Argentina, but throughout Latin America. In neighboring Brazil, President Dilma Rousseff’s administration made little effort to hide its preference for Macri’s opponent. As her government plumbs record lows in opinion polls, the centrist opposition has been inching toward power. Macri’s victory could accelerate that process.

Likewise, Macri’s victory could give voters in Venezuela – headed to the polls on December 6 – the courage they need to cast their ballots against their increasingly authoritarian government. Indeed, Macri has announced that, in response to human rights violations in Venezuela, he will invoke the so-called “democratic clause” in the statutes of Mercosur, which could lead to Venezuela’s suspension from the regional trading bloc.

This stands in marked contrast to the cowardly and complicit silence of other governments in the region. If Macri follows through, that action alone will guarantee his presidency a mention in the history books. /project-syndicate