When Mauricio Macri won election as Argentina's president in 2015, he promised to usher in a new phase of economic and trade liberalization. Expectations were high that foreign direct investment would return to the country, that inflation would fall and that, as a result, the economy would grow.
The Argentine peso has been the world's worst-performing currency this year. Its tumble led Argentina's government to request a $57 billion standby loan from the International Monetary Fund, which, in turn, required President Mauricio Macri's administration to implement austerity measures. Public backlash over his tighter fiscal policies have jeopardized his chances at re-election.
But things haven't turned out that way. In the nearly three years since Macri assumed office, Argentina reported annual economic growth only once, in 2017. Its inflation rate is expected to reach 40 percent this year, and the value of the peso has plummeted, making it the worst-performing currency in the world. The delicate financial situation prompted Macri to request a $57 billion standby loan from the International Monetary Fund — and to accept the attending requirements to cut public spending. Facing economic disaster, Macri is now forging ahead with unpopular austerity measures that could cost him re-election next year. A corruption scandal, meanwhile, could put Argentina's main opposition figure, former President Cristina Fernandez de Kirchner, at a disadvantage in next year's race. The dual political and economic crises mean that another opposition candidate will probably come to power in Buenos Aires in the next election and temper the country's economic reforms.
Staying the Course
The strain of Argentina's economic tailspin and the cuts to public spending already have taken a toll on the president's popularity. Macri's approval rating fell from over 40 percent to 35 percent last month. At the same time, social movements and labor unions — including Argentina's biggest union, the General Confederation of Labor, which staged a national strike Sept. 25 — have taken to the streets in protest. The problem for Macri is that he hasn't given any indication of easing up on his efforts to liberalize Argentina's economic and trade policies. Despite the peso's dismal performance this year, Argentina's central bank has not implemented capital controls to try to stabilize the currency. Instead, the institution is still debating over whether and how to intervene. (Its most likely solution would be to impose a currency band that would keep the peso's exchange rate between 33 and 44 to the dollar.) The central bank's president, in fact, resigned Sept. 25 amid the tumult.
With just over a year to go before the next election in October 2019, Macri's prospects of winning another term are looking dim. He will probably lose the vote unless Argentina's economic indicators take a decisive turn for the better before then. And if the economy continues its decline, popular discontent with his reforms will only grow. The end of his presidency may well spell the end of Argentina's economic liberalization.
An Opportunity for the Opposition
But for Argentina's political opposition, the president's decline is a boon. Part of the population may look more fondly on the heavy social spending of past populist administrations as the country's economic situation deteriorates. Fernandez, a former president and first lady currently serving in Argentina's Senate, probably won't reap the benefits in her own bid for the presidency. A federal judge indicted her earlier this month on corruption charges after conducting an investigation into her administration, which served from 2008-2015. Because her position as a senator provides her immunity from prosecution — a privilege that the Argentine Congress could lift only with a two-thirds vote — Fernandez faces little threat of a trial and will likely move ahead with her campaign. Even so, the indictment could give other opposition candidates a better shot at victory.
Rumors have circulated that former Finance Minister Roberto Lavagna, former Buenos Aires Governor Daniel Scioli and Congressman Sergio Massa — all fellow members of Fernandez's Peronist bloc — may contest the presidency. If any of them were to win, he would probably strike a balance between the economic policies of Fernandez and those of Macri. All three politicians are wary of Macri's proposals to open Argentina up to more foreign trade, though they favor reducing the fiscal deficit and making the country more attractive to foreign investment. And so, the fallout of Argentina's current political and financial crises will probably at least slow, if not halt, the country's economic reforms over the next several years.