Argentina on a path to perdition

WITH SIX months to go until the midterm elections, the ruling Cambiemos coalition is dissolving into its original factions.

A loose grouping, whose only common identity was the defeat of the Kirchner-led Frente Para la Victoria, the FPV, each bloc is trying to carve out a niche in the electoral space.

Argentina’s ambassador to the United States, Martin Lousteau, was one of the first to defect. Although he claimed that he was not leaving the coalition, he began calling for the introduction of party primaries in the city of Buenos Aires and across the rest of the nation.

This would be a major sea change in a country that has been dominated by party lists. Party chiefs make lists of candidates, and the electorate is asked to vote for the entire ticket – not for individual candidates. This creates an enormous problem because it reduces the accountability of the elected official. Candidates are loyal to the party chiefs who construct the list, and not to the electorate. As a result, the mechanisms of representation are destroyed.

Lousteau went on an extensive marketing campaign, appearing on all of the major television talk shows to promote his proposal. Of course, this raised the ire of the political chiefs, particularly within the Cambiemos coalition. It was no surprise that the debonair politician would make such a proposal. Given his high profile, he will easily shine in any primary.

Another rising light in the political spectrum is the renewed alliance between Sergio Massa and Margarita Stolbizer. Although neither were formal members of the Cambiemos coalition, they were instrumental in establishing President Macri’s political agenda. Massa, a leader in the Peronist camp, helped push the legislation that was needed to settle with the holdouts.

Meanwhile, Stolbizer acted as an attack dog, viciously going after former President Cristina Fernandez de Kirchner’s tangled network of corrupt businesses. The Massa-Stolbizer camp provides lower-income Argentines with an interesting contrast to the flailing Macri administration.

Macri’s dapper cabinet ministers do well on the international circuit, with many of them having studied and worked abroad. However, at home they are perceived to be aloof and incapable of reactivating the economy.

There are several reasons why the Argentine economy remains in the doldrums. The first is the divisive nature of

the Macri camp. There seems to be a consensus in the Cabinet that the best way to remaining in control is through polarisation.

The major Argentine cities have been gripped by marches and countermarches. Likewise, there has been an enormous centralisation of power in a handful of technocrats, who are more interested in sending tweets rather than making headway on the economic front. Their obsession with the midterm-elections has made everything else expendable.

This has led to the second major problem. The government has pushed the economy into a dead end. In its blind electoral ambition, the administration has expanded the size of the public sector to almost 50 per cent of GDP. As a result, the fiscal deficit has exploded, despite the fact that it has one of the highest tax rates in the world. This has forced the government to rely heavily on debt issuance to balance the books.

Government officials are convinced that the international capital markets are more than willing to permanently finance the shortfall. However, they seem to forget that international shocks are a recurrent feature of the global marketplace and that the markets can close for prolonged periods of time.

This toxic cocktail of polarisation, economic stagnation and fiscal unsustainability has put Argentina on a precarious path to perdition. A third of the population now resides below the poverty line, a situation that is worse than when President Fernandez de Kirchner left office.

Cracks are starting to appear throughout the society. The major labour unions are divided. The Peronists have split into opposing camps. Political tensions are running high in many provinces, such as Buenos Aires, Santa Fe and Cordoba, and some provinces, such as Santa Cruz, are literally on fire.

The media has split into warring factions that only serve to incite partisan passions. The dangerous Balkanisation of Argentina is the reason why so many multinationals are staying away, despite the administration’s market-friendly rhetoric and the country’s enormous bounty of natural resources.

Argentines take great pride in that they never descended into the economic chaos of Venezuela, but the divisive forces that are gaining momentum could lead to social unrest.

It is time to put the vitriol aside so the government can forge a national consensus that will nudge Argentina on to a more sustainable economic path.