Mauricio Macri will vacate the presidency of Argentina next month after a disappointing term in office and a first-round defeat to Peronist candidate Alberto Fernández.
Fernández won by bringing the controversial former president Cristina Fernández de Kirchner into the fold as vice president to help unite the moderate and leftist strands in his party. That unity will be tested by a severe economic crisis.
Macri was the first conservative to be elected president since the restoration of democracy, but this novelty quickly wore off and his tenure was marked by problems only too familiar to Argentinians.
Vowing to dismantle capital controls, energy subsidies and trade barriers “on day one,” his vision was to rid Argentina of its Peronist legacy and unlock prosperity.
However, an absence of Peronism didn’t constitute enough of a plan. Macri allowed for capital flight without convincing the business community that Argentina was a safe place to invest. In September, he reintroduced controls in an attempt to stave off a fifth sovereign default in thirty years.
Macri also promised economic growth and “zero poverty”, but Argentina fell into recession last year amid concerns about the impact of his gradualist approach to reform on massive government deficits and rising inflation, now circa 60 percent. The economy contracted 5.8 percent in the first quarter of this year. Seven million people have fallen into poverty since Marcri took office in 2015.
As these recurrent challenges presented themselves, Macri showed little imagination in offering solutions. When the peso lost more than half its value, his first move was to raise interest rates to record highs. When this only exacerbated the problem, he went cap in hand for a $57 billion bailout from the International Monetary Fund (IMF), the largest in the institution’s history. Far from building confidence in the country’s economic policies, his move merely reminded Argentinians of the IMF’s much despised role in the last default in 2001.
With demonstrations adding to the sense of crisis, it was hardly surprising Macri lost reelection. Had he won, an escalation of protests similar to those on the streets of Chile and Ecuador would surely have been in the cards.
What to expect
Fernández will come to power in December with an enormous economic challenge on his hands. Hopes are that he will defy Peronist orthodoxy by renegotiating IMF as well as private debts. But he cannot show too much pragmatism for fear of losing popular support, in particular from Cristina’s working-class base.
Halting Macri’s planned labor and pension reforms should satisfy them, but that may be the extent of his social policy as he will be hamstrung by the depth of the country’s economic plight.
A potential cause for optimism is Argentina’s Vaca Muerta oil and shale gas reserves, however, Fernández will have to navigate the constraints posed by a surplus in international oil production, a push toward sustainable energy production, Argentina’s geographical distance from prospective export markets and the cost of extraction.
All of this Fernández will have to manage without a majority in the lower chamber of Congress.
In the Senate, where the vice president can be influential, Cristina will have to fight her polarizing instincts and take a consensual approach if the new government is to muddle through yet another financial crisis.
A peaceful transition from Macri to Fernandez will be a feather in the cap of Argentina’s still young democracy, but no leader has yet found a solution to the country’s chronic economic woes. Fernandez has his work cut out for him.