Wwhisper Calle Lavalle or Calle Florida in the center of Buenos Aires, every 20 meters someone will shout “Biot” (the exchange), offering to buy dollars at roughly double the official exchange rate. Supermarket prices are rising every month. Inflation will hit 100% this year. As has happened many times over the past 50 years , Argentina is once again lost in an economic maze largely of its own making. The distortion has reached a dangerous point. “If this continues, we will see supermarkets being robbed again,” said a taxi driver.
The source of the current instability is a weak and divided Peronian government. The office of President Alberto Fernandez is due to the decision of the most powerful figure in Peronism, Cristina Fernandez de Kirchner (no relation), who chose him as the Peronist candidate and campaigned herself his vice president. They inherited an economy that their conservative predecessor, Mauricio Macri, tried and failed to fix.He struck a $57 billion deal with the U.S. International Monetary Fund to avoid disaster.Mr Fernandez’s first finance minister, Martin Guzman, was an academic who expanded price and exchange controls, restructured foreign bonds and negotiated a new deal with the government International Monetary Fund.
The fund is more accommodative than in the past. Even so, to make the economy viable, the agreement required Argentina to cut its fiscal deficit and the central bank to print money to finance the government and boost international reserves. Ms Fernandez’s allies in Congress, who prefer inflation to austerity, voted against the deal, which was passed by moderate Peronists and the opposition. When Mr. Guzmán tried to enforce it, she forced him to leave in July. That sent the peso plummeting on the street; demand for government peso bonds dried up. As protests and strikes mount, some fear the government could collapse.
Reluctantly, the Fernándezes turned to Sergio Massa, the third major figure of Peronism, who moved from presiding over the lower house of Congress to head a strengthened economy ministry. He brings some peace, though not much. His office in Buenos Aires told Bello that his goal was to reduce inflation by cutting the fiscal deficit and building confidence in the peso through trade surpluses and foreign exchange reserves. “this International Monetary Fund The agreement is an anchor, not a goal,” he said. “It’s useful as a roadmap. “
Mr Massa introduced the reserves by offering soybean farmers a better exchange rate as a stopgap to repatriate their dollars.Even so, net reserves stand at just $2 billion, according to the agency International Monetary Fund. To protect Argentine football fans as they prepare to travel to Qatar for next month’s World Cup. He has reduced government spending, enacted a stricter budget and worked to cut indiscriminate subsidies for utility bills and public transport. Inflation helps this effort by cutting the real value of spending.when minister gets a boost International Monetary Fund A $3.8 billion appropriation was approved on October 7 (although the money will be returned to it in the form of debt repayments). The fund praised Mr Massa’s efforts but warned the risks remained high.
The greatest of these dangers is political. Ms. Fernandez tweeted that the government should do more to bring down food prices; her son Maximo, a congressman, scoffed at the “soy dollar.” However, Ms Fernandez must know that Mr Massa is the only one who stands between Argentina and chaos. The country faces a one-year general election in which the opposition will be largely won. Thorough economic reform and a return to sustained growth will have to await a stronger and more committed government. For the current “the goal is to survive because they don’t govern,” said Luis Tonelli, a political scientist close to the opposition. Facing legal charges for corruption (which she claims are political persecution), Ms Fernández has an interest in being re-elected as a senator to retain immunity from imprisonment.
Mr Massa is a rival as well as an ally. Now 50, he is widely considered to have presidential ambitions. He recalls the Peronist conservatives under Carlos Menem in the 1990s, but has since been sidelined by Ms Fernandez’s left-wing populism. Failure, he will be just a footnote to the government’s broader failures. Do too well and Ms. Fernandez may cut him. But Mr Massa has at least a modest chance of slowing the worsening of Argentina’s woes. In doing so, he will earn himself future fame.
Read more from our Latin America columnist Bello:
Peru has an incompetent president and a discredited Congress (September 29)
Nayib Bukele wants term limits abolished in El Salvador (September 22)
Colombia’s new president courts Venezuela’s tyrant (September 15)