Ar­gentina can­di­date aims to over­haul econ­omy

The China Post - - COMMENTARY - BY PETER PRENGAMAN

The man who could be Ar­gentina’s next pres­i­dent wants to put an end to tight gov­ern­ment cur­rency con­trols, make peace with the na­tion’s cred­i­tors and im­prove se­verely frayed ties to the United States. In short, Mauri­cio Macri is promis­ing to undo much of what Pres­i­dent Cristina Fer­nan­dez and her late hus­band Nestor Kirch­ner cre­ated over the past 13 years.

It’s a plat­form that ap­pears to be gain­ing trac­tion.

The right-lean­ing Buenos Aires mayor leads many polls ahead of the Oc­to­ber elec­tions. His pop­u­lar­ity is buoyed by eco­nomic frus­tra­tion and wide­spread anger over the mys­te­ri­ous death of fed­eral pros­e­cu­tor Al­berto Nis­man, who ac­cused Fer­nan­dez of pro­tect­ing those re­spon­si­ble for Ar­gentina’s most se­ri­ous ter­ror attack.

Macri be­lieves pro-mar­ket re­forms will re­store con­fi­dence in Ar­gentina, both at home and abroad. Those themes are res­onat­ing: A hand­ful of polls con­ducted in March gave him sin­gle-digit leads, a big change from six months ago when he con­sis­tently came in third.

Macri says if he is elected, he would move quickly to re­stric­tions on Ar­gen­tines’ abil­ity to trade pe­sos for U.S. dol­lars.

But crit­ics warn against do­ing too much, too fast. Lift­ing cur­rency con­trols overnight could un­leash a fi­nan­cial “blood­bath,” ac­cord­ing to for­mer Cen­tral Bank Pres­i­dent Aldo Pig­nanelli.

Econ­o­mists say end­ing cur­rency con­trols would re­quire at least two other ma­jor changes: shor­ing up for­eign re­serves by tak­ing on more debt, and de­valu­ing the peso to bring it to true mar­ket value. Macri has not waded into the pol­icy de­tails of a de­val­u­a­tion, but has re­peat­edly said Ar­gentina must ne­go­ti­ate with a group of hold­out cred­i­tors, which would al­low the coun­try to ac­cess in­ter­na­tional debt.

Such pro­pos­als are fright­en­ing for many in a na­tion still spooked by a US$100 bil­lion de­fault in 2001 that came amid an eco­nomic col­lapse. Overnight, many Ar­gen­tines saw their sav­ings evap­o­rate and the coun­try turned into a fi­nan­cial pariah. Daniel Sci­oli, a rul­ing party front-run­ner who has tied or had a slight lead over Macri in some polls, has cau­tioned that change must come grad­u­ally.

While the strong hand of Fer­nan­dez’s Jus­ti­cial­ista Party helped sta­bi­lize the econ­omy af­ter it took power in 2003, Ar­gentina’s re­cov­ery has stalled, strug­gling with in­fla­tion that pri­vate econ­o­mists put at over 30 per­cent, cap­i­tal flight and in­creas­ingly frosty re­la­tions with many trad­ing part­ners, in­clud­ing the U.S.

Fer­nan­dez’s gov­ern­ment “isn’t giv­ing peo­ple so­lu­tions,” Macri said dur­ing a cam­paign rally in the cen­tral city of Rosario this week. “There is an im­por­tant need for change.”

Macri, cur­rently on a cam­paign blitz across the coun­try­side, de­clined sev­eral re­quests for an in­ter­view.

The son of an Ital­ian-born industrial mag­nate, the 56-year-old Macri has said his po­lit­i­cal ca­reer was in­spired by his 1991 kid­nap­ping at the hands of fed­eral po­lice of­fi­cers, who re­port­edly re­ceived sev­eral mil­lion dol­lars in ran­som from Macri’s fa­ther.

Seized by sev­eral men while re­turn­ing home one night, Macri was held in a base­ment two weeks, not al­lowed to see day­light or even the faces of his cap­tors. The or­deal, Macri has said, helped him see how poverty and vi­o­lence lead peo­ple to do ex­treme things, sit­u­a­tions he had never ex­pe­ri­enced grow­ing up in a rich fam­ily.

Sup­port from Busi­ness Elite

In the 1990s, Macri made a name for him­self as pres­i­dent of the Boca Ju­niors soc­cer team as it won nu­mer­ous in­ter­na­tional ti­tles, mak­ing him popular through­out the coun­try of 41 mil­lion peo­ple.

In 2007, Macri was elected mayor of Buenos Aires and quickly showed his will­ing­ness to break po­lit­i­cal con­ven­tion. Upon tak­ing of­fice, he fired 2,400 city em­ploy­ees he claimed were “gnoc­chis” — a term com­ing from the Ital­ian dumplings which Ar­gen­tines use to de­scribe bu­reau­cratic free­loaders.

He also rubbed against the fed­eral gov­ern­ment by form­ing the cap­i­tal’s first city po­lice unit, coun­ter­ing the fed­eral po­lice force. He’s cred­ited with im­prov­ing trans­porta­tion in Ar­gentina’s big­gest city.

With a busi­ness-ca­sual style and a full head of salt-and-pep­per hair, Macri of­ten ap­peared in the so­ci­ety sec­tions of Buenos Aires me­dia, which closely fol­lowed the ro­man­tic life of the ris­ing politi­cian, now mar­ried for a third time.

Macri’s sup­port comes mainly from Buenos Aires, par­tic­u­larly among the busi­ness elite and the mid­dle and up­per classes. He will have to work hard to win over the prov­inces, where poorer peo­ple ben­e­fit most from gov­ern­ment pro­grams and the rul­ing party has strong or­ga­ni­za­tional mus­cle.

Gas sub­si­dies keep en­ergy costs low, hefty an­nual pay raises are com­mon for public work­ers and Ar­gen­tines en­joy some of the most gen­er­ous va­ca­tion al­lot­ments in the West­ern Hemi­sphere.

How­ever, high in­fla­tion erodes many perks and or­di­nary Ar­gen­tines are in­creas­ingly fed up with limited job op­por­tu­ni­ties and fre­quent mar­ket fluc­tu­a­tions that com­pli­cate ba­sic trans­ac­tions like buy­ing and sell­ing prop­erty. “The eco­nomic sit­u­a­tion is a dis­as­ter,” said 29-year-old Juan Car­los Fe­dyna, who runs a small book­store ded­i­cated to Pope Fran­cis, an Ar­gen­tine na­tive.

Fe­dyna said the store stopped ex­port­ing its books and trin­kets two years ago be­cause the gov­ern­mentset ex­change rate en­sured the busi­ness would al­ways take a loss.

Such con­trols are the ba­sis of ram­pant black- mar­ket trad­ing. Tourists and Ar­gen­tines re­turn­ing from abroad trade dol­lars or eu­ros in spots like Calle Florida, an up­scale prom­e­nade where men stand­ing be­tween designer clothes stores and high-end bak­eries call out “Cam­bio! Money change!”

While the of­fi­cial rate hov­ers around 8 pe­sos to the dollar, the black-mar­ket rate hit 15 pe­sos at times the last year.

Fer­nan­dez, who is barred from seek­ing a third term, has blamed much of the eco­nomic trou­bles on the United States, de­mo­niz­ing in par­tic­u­lar a group of U.S. bond­hold­ers who re­fused to rene­go­ti­ate terms on Ar­gentina’s debt.

The 2001 de­fault shut Ar­gentina out of in­ter­na­tional credit mar­kets and its for­eign re­serves have sunk to US$31.5 bil­lion, low for one of the largest economies in Latin Amer­ica.

The most likely way to shore up re­serves would be to reach a deal with the U.S. cred­i­tors, a group Fer­nan­dez has blasted as “vul­tures.” That would end a legal battle over the debt and al­low the coun­try to ac­cess credit over­seas.

Macri has not spo­ken pub­licly about the dis­pute in re­cent months, but he has sug­gested Ar­gentina must reach an agree­ment to re­store trust in the econ­omy — a step he would like to be the one to take.

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