Argentinian president Cristina Fernández de Kirchner’s popularity has dropped to a thirteen month low of 42 percent as the Latin American nation’s economy is starting to slow down.
Kirchner, who won reelected in October with 54 percent of the votes, has enacted numerous protectionist measures that benefit her allies in the labor unions but undermine Argentina’s overall competitiveness.
She has also had to cut back on popular subsidies and welfare spending in order to achieve a budget that will almost be balanced this year.
Argentina is the world’s largest exporter of soy oil and a major supplier of corn and soybeans. A rising Asian demand for commodities has fueled a healthy economic expansion in recent years but the government continues to throw up roadblocks to a commercial sector that is otherwise flourishing.
President Kirchner implemented a one for one trade policy which mandates that companies that bring goods into the country match their value with exports. She enacted specific trade restrictions against Argentina’s biggest trading partner, Brazil. According to the International Monetary Fund, the country “has introduced about one hundred restrictive measures since 2009,” which is “more than any other individual country” in the world.
The results are painfully familiar. Argentina’s failure to live up to its potential is a recurring theme in twentieth century South American history.
Twice president, Juan Domingo Perón introduced an autarkic corporatism that empowered unions, nationalized entire industries and destroyed the nation’s burgeoning imports and exports sector. Despite wild populist swings to the left and to the right, interrupted by military coups, the aim of “economic independence” is still present in Argentinian politics.
Kirchner is a Peronist pur sang. She rallies against multinationals and foreign Argentine bondholders in her speeches, prompting international investors to shun Argentina whenever they can.
Argentina now ranks among the least economically free nations in Latin America. Regulations for businesses are burdensome and nontransparent. Tariffs, import and export controls, licensing provisions, restrictions on ports of entry and subsidies significantly distort trade. Domestic preference in government procurement predated Kirchner’s administration but has not been repealed.
Foreign investment is prohibited in certain sectors. The judiciary is notoriously slow and inefficient, forcing investors to resort to international arbitration. Corruption is endemic.
So far, commodity sales have been able to make up for Argentina’s institutional weaknesses. If the global economy falters however and Kirchner’s approval rating falls with it, she will have little choice but to reform — or make way for new leadership.