Argentina's Confidence Game
Argentina once again finds itself running out of dollars and urgently in need of assistance from the International Monetary Fund. But with a ruling coalition that lacks a common view on whether and how the economy needs to be reformed, outside assistance will not resolve the country’s secular malaise.
BUENOS AIRES – Argentina’s Peronist government is in turmoil after being humbled in primary elections on September 12. Its candidates for this November’s midterm legislative elections were defeated in 17 of 24 provinces, including the traditional Peronist stronghold of Buenos Aires. The government’s de facto leader, Vice President Cristina Fernández de Kirchner, is now understandably upset with its de jure one, President Alberto Fernández, whom she chose to lead her ticket in the 2019 election.
The electoral results came on the heels of a scandal unleashed by videos showing Fernández partying with friends while Argentinians were locked down and even prevented from bidding farewell to their dying loved ones. Voters also expressed disappointment with an economy that has been stagnant since 2011. In a country of 45 million people, only around seven million have formal jobs in the private sector, which effectively has not created new employment since 2007. Some 20 million people are surviving in the informal economy or living on public handouts.
Taxpayers are exhausted. And although demand is depressed and public utility prices are frozen (the government subsidizes electricity companies, heating-gas providers, and public transport firms), inflation is soaring at 51.4%. In a country that used to be proud of its middle class, per capita incomes have fallen back to 1998 levels, and about 42% of the population is now below the poverty line.