Can Fernández Fix Argentina?
By voting President Maurico Macri out of office, Argentinians have signaled that they will no longer tolerate continued economic crisis, much less policies that appear to make matters worse. But, because solutions to Argentina's problems are not mutually compatible, the new government will likely face similar challenges.
BUENOS AIRES – The acute economic crisis that has been afflicting Argentina since 2018 has just produced a change in government. The newly elected president, Alberto Fernández, inherits from his predecessor, Mauricio Macri, a severely battered economy. Argentina is now being squeezed by a high debt burden, impaired social conditions, and soaring inflation and unemployment all at the same time.
Since 2012, the country has struggled to generate a sufficient inflow of dollars through exports. Between 2011 and 2015, then-President Cristina Fernández de Kirchner (now the incoming vice president) imposed severe currency controls that resulted in macroeconomic rigidities. But since eliminating capital controls in 2015, Macri’s administration has since made the problem worse. Instead of simply rolling back the controls that had distorted the currency market, the government lifted all controls, including those preventing speculative investment, which were considered to be macroeconomic safeguards.
Macri also promoted unprecedented debt policies, resulting in additional borrowing of $193 billion. This included a $57 billion loan from the International Monetary Fund, which came on top of a previous $44 billion loan (63% of the institution’s credit lines are now extended to Argentina). By the end of this year, the country’s debt-to-GDP ratio will have risen from 52% to 93%, according to IMF forecasts. Moreover, short-term debt deadlines have exerted additional pressure on Argentina’s already-dire balance of payments.
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