Publication Political Parties / Election Analyses - Brazil / Cono Sur Argentina Ahead of a Peronist Comeback

Neoliberal President Mauricio Macri set to leave behind an economic and socio-political mess

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October 2019

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Election posters of the opposition party "Frente de Todos" in Buenos Aires. Presidential candidate Alberto Fernandez and former Argentine President and current Senator Cristina Fernandez de Kirchner can be seen. The parliamentary elections in Argentina took place on 27th October. JUAN MABROMATA / AFP

The Argentinian presidential election on 27 October appears to be a foregone conclusion: barring a dramatic shift in political mood, the Peronist duo of Fernández and Fernández will win in the first round of voting. Such a result would be yet another nail in the coffin for the neoliberal project, this time spearheaded by Mauricio Macri’s pro-business administration. The Trotskyist left, however, remains marginal, and must once again expect to have fewer representatives in parliament.

Gerhard Dilger is director of RLS Regional Office for Argentina, Chile, and Uruguay in Buenos Aires.

Martin Ling works at the foreign desk of neues deutschland.

The presidential challengers re-arranged this year’s political landscape with a pair of bombshells: in May, Cristina Fernández de Kirchner (who had previously governed from Argentina’s pink presidential palace for eight years) announced—to general astonishment—her former cabinet head Alberto Fernández as a presidential candidate in a highly-staged video address. She herself would only be a candidate for vice-president.

It was a clever way to avoid putting herself at the centre of the election campaign—given her middling second term as president (2011-2015), countless corruption trials, a persona commonly perceived as arrogant, and her outsider position within her own Peronist party (Partido Justicialista, henceforth PJ), defeating the incumbent Macri directly seemed more or less impossible. Promoting Alberto Fernández, who had served as cabinet head under Néstor Kirchner (2003-2007), was a strategic masterstroke.

Within a few months, the moderate Peronist candidate had succeeded—unlike his unfortunate predecessor Daniel Scholl four years prior—not only in uniting a majority of the PJ behind him, but also a large portion of the minor left-liberal parties, through the Frente de Todos (Everyone’s Front). In doing so, he positioned himself as the candidate of reconciliation, one who many believed could at least partly bridge the deep divide that had riven Argentina’s political establishment.[1]

This potential was evident in the preliminary elections of August 11, which “Alberto” and “Christina” won definitively with 47.7 percent of the vote, while incumbent liberal-conservative Macri and his electoral coalition Juntos por el Cambio (a “together for change” slogan that also invokes the name of his governing coalition Cambeimos [Let’s change things]) ended up with only 32.1 percent.

“On 11 August, Macri lost not only an election but also power. The emperor stood naked without his clothes.” That was how left-wing journalist Fernando Rosso summarized a poll that was this time much more than just a test of the political mood. The primary cause of such an unexpected defeat lay in the government’s spectacular economic failures.

In Argentina, Macri’s quip from June 2018 remains ever-present: “We were on the right path… but then things suddenly started to happen.” In saying this, he sought to make external factors responsible for the abrupt devaluation of the peso that began in April 2018, rather than the neoliberal programme that—as during the military dictatorship of 1976–1983 and in the 1990s—had made the rich richer and the poor poorer.

Mass Poverty and the Threat of National Bankruptcy

If Macri and his cabinet of managers had felt previously able to count on re-election, this was scuppered by the key economic indicators of the previous year. By September 2019, annual inflation was at 53.5 percent and banks seeking fresh finance from the central bank had to pay over 70 percent interest. Companies went bankrupt by the dozen, mass lay-offs became common, and one-third of Argentinians were living below the poverty line—almost 16 million people. In 2018 alone, around 3.4 million people were forced into poverty due to a sluggish economy and high inflation.

A September 2019 report by Argentina’s National Statistics and Censuses Institute (INDEC) states that 35.4 percent of Argentinians live below the poverty line, an 8.1 percent increase on the previous year. According to an INDEC study, in 2018 the value of the so-called “basic shopping basket” (canasta básica) increased by around 50 percent to 32,000 pesos—roughly 530 US dollars—which corresponds to the income that a four-person family needs to earn in order not to be living in poverty. As of September 2019, the minimum wage was 15,625 pesos—or less than 255 US dollars—per month. A study by the Pontifical Catholic University of Argentina six months prior had already shown that 3.4 million Argentinians ate only once a day.

In the fight against poverty—one of his key election promises—Macri failed spectacularly. The marker of extreme poverty (indigencia) is set at 12,773 pesos, which corresponds to the amount deemed necessary for essential provisions (canasta básica alimentaria). In 2018, the price of these essential provisions increased by 57 percent. When Macri took office in December 2015, the amount required for the same provisions was 3,582 pesos. This development continued through 2019, even if it is yet to be statistically measured.

So Argentina has once again fallen into a sharp economic and financial crisis. One reaction to this was the change made by the finance minister in mid-August: “Whatever happens—whoever wins the election—the challenge we face is to reach a safe haven by December 10, no sooner or no later.” This quote stems from Macri’s finance minister at the time, Hernán Lacunza: the question now is whether the boat will sink beforehand.

Lacunza has been in office since 17 August, and was installed to try to avert Argentina’s ninth declaration of bankruptcy since its independence in 1816. Whether this succeeds lies in the hands of the country’s creditors. If they do not agree to the deferral and debt extension put forward by Lacunza at the end of August, Argentina will go bankrupt. But due to the country’s lack of insolvency laws, the state cannot officially go bankrupt, meaning that it would simply slide into the next unregulated governmental and economic crisis.

The current crisis intensified at the end of August because Lacunza was unable to re-finance outgoing short-term government bonds and therefore opened up the possibility of longer repayment periods, with which the highly indebted country is seeking to create a bit of breathing room. At issue is both government bonds issued to private investors as well as credit owed to the International Monetary Fund (IMF) totalling around 100 billion US dollars.

The IMF is yet to allow its beloved Macri to fall, however, with IMF spokesperson Gerry Rice saying that “we understand that [Argentina] ha[s] taken these important steps to address liquidity needs and safeguard reserves… [The IMF] will continue to stand with Argentina during these challenging times.”

This understanding has a tangible basis: the IMF granted Argentina a record standby loan of 57 billion US dollars in 2018, as the peso began to strongly depreciate. At the time, the exchange rate was roughly 20 pesos to the US dollar, and has since risen to over 40 pesos. This was a consequence of accelerated capital flight from Argentina, which sent inflation skyrocketing. It was Macri’s business associate Donald Trump who urged the IMF to take control and found support in IMF head Christine Lagarde. Eighty percent of the 57 billion US dollars has already been paid out.

Under then-finance minister Nicolás Dujovne, the Macri administration utilized large parts of the IWF’s loan to shore up the peso, but were only able to slow the currency’s depreciation. Following Macri’s clear defeat in the preliminary election, the peso came under further pressure and sunk to between 45 to 60 pesos to the US dollar.

In the meantime, the capital movement controls implemented by the government on 1 September have had an effect: the long queues outside the banks have dissipated for the time being, although they remained present for a few days following the decree regarding foreign currency controls, which came into force on a Sunday. The decline of the Argentinian peso has also come to a momentary halt, although 60 pesos are still necessary to buy a single US dollar.

Because the government had ran out of foreign currency, on 1 September, a Sunday, they issued a decree requiring large exporters to obtain permission from the central bank to purchase foreign currency and to send currencies abroad. The acquisition of US dollars by private citizens would now be limited to 10,000 US dollars (around 9,100 euros) monthly.

With this Macri was able to effect a dramatic change of course. In 2015, he had promised to “abandon the controls preferred by the previous government”. The measures were necessary in order to “more intensively regulate currency trading and strengthen the economy’s standard functions” the decree read.

Shortly after assuming office in December 2015, Macri introduced an initial wave of liberal financial reforms, which included freeing up the exchange rate, removing taxes on agricultural exports and reducing them on soya exports, and abolishing mining taxes. But the flood of new investments he promised did not eventuate. In his election campaign, he had called for a “revolution of joy”. Instead, in June 2018 the IMF returned to Argentina, at which point he had justifiably garnered an exceedingly poor reputation.

The Neoliberal 1990s and the 2001–2002 Crisis

Under right-wing Peronist Carlos Menem (1989-99), Argentina slavishly adhered to IWF requirements. Import tariffs were kept to a minimum; company profits were taxed at a lower rate than in the USA; the value-added tax, which everyone pays, was drastically increased; and the state issued bonds that offered strong returns to attract capital to the country. This primarily benefited investors, while the average Argentinian footed the bill.  

Despite increasing interest payments, in December 2001 the IMF refused to release another credit tranche, which meant Argentina was unable to service its debt and led to the largest national bankruptcy of the post-war period.

Millions of Argentinian savers lost large quantities of their assets. The dramatic days around Christmas that year remain seared in peoples’ memories, when more than half of the Argentinian population slid into poverty and the chant Que se vayan todos (“You should all get lost!”) rang out on the streets against the political class. The keys to the Casa Rosada felt the touch of five different presidents’ hands within the space of only a few days, and it was not until Néstor Kirchner assumed power in May 2003 that the situation returned to relative calm.

Ever since, the IMF has been seen as a collective enemy—by everyone but the elites, that is. Thanks to a loan from then-president of Venezuela Hugo Chavez, in 2005 Kirchner repaid all IMF debts—almost 10 billion US dollars—ahead of schedule, so that the country could set its own economic policy again.

It is little wonder then that Macri’s decision in 2018 to take the highly symbolic turn to the IMF was not a straightforward one. Without IMF funds, however, he saw no country, partly because the reversal in interest rates in the USA had massively increased Argentina’s debt-servicing requirements in 2018. The 30 billion US dollars originally requested from the IMF had grown to 57 billion by September. The terms: a balanced primary budget (not including debt servicing) covering state incomes and expenses by 2020.

Memories of the Civil-Military Dictatorship

Argentina’s crisis came with a message. Just like the military regime’s henchmen from 1976 to 1983, Macri wanted to generate growth through deregulation and foreign debt—and he was equally unsuccessful. During the dictatorship, the country under finance minister José Alfredo Martínez de Hoz committed itself to deregulation and liberalization while also massively increasing foreign debt. In 1976, the national debt stood at 9 billion US dollars—seven years later, it had reached 46 billion.

According to World Bank reports, 44 percent of the debt taken on between 1976 and 1983 was used to finance capital flight and 33 percent was spent on interest and other repayments to foreign banks, with the remaining 23 percent invested in arms imports and unregistered goods. The process of deindustrialization also began under military rule, with an overvalued currency making purchasing weapons cheaper and hampering Argentinian industrial exports. Macri’s approach to economics resembled that of the military. To make matters worse, not once did he hold to the deficit reduction guidelines, which alongside deregulation and privatization form the three pillars of the neoliberal development blueprint of the so-called Washington Consensus, which had been preached to him by the IMF and the World Bank since the end of the 1980s.

Instead, there was the nasty shock of what is known as the twin deficits phenomenon: in 2018, Argentina’s budgetary and current account deficit both exceeded gross domestic product (GDP) by 5 percent. In the resulting economic and financial crises, national debt rose steeply to around 90 percent of GDP, or 334 billion US dollars. Three-quarters of the outstanding debt was in foreign currencies, and around 100 billion US dollars had been taken on by the Macri government itself in the form of new foreign debt.

This means that the funds to cover interest and repayment rates must to be earned through foreign trade surpluses. Should this continue to prove unsuccessful, the gap will have to be plugged by new loans, through which debt levels will only increase. One direct outcome of this is the devaluation of the peso, while another is capital flight, which in the Macri era is estimated to have reached approximately one billion US dollars since the end of 2015.

Argentina’s new president, who will assume office on December 10, will not have a lot of room to manoeuvre. US President Donald Trump’s desire to trigger a global economic slowdown, for example, could impede an Argentinian export offensive on the global market, which would be an indispensable part of the country’s revitalization strategy.

Soy Exports Are Not the Only Option

“As a developing country and food producer, Argentina needs trade regulations so that it can export its products without barriers and protectionist measures. Were China and the USA to fight and end up destroying the World Trade Organization, this would be very risky for us. What’s more, China’s punitive tariffs on soy from the USA puts downward pressure on prices—and that damages us,” says Gustavo Idígoras, President of Argentina’s Chamber of Industry and Export.

However, the often-repeated view that Argentina’s economic growth is solely dependent on high prices for its agricultural exports—particularly soy—is incorrect. During Néstor Kirchner’s time in office, Argentina was already experiencing high growth rates prior to the onset of the soy boom in 2006, and they were primarily based on a revitalization of the country’s economy. Kirchner, who died in 2010, set the course for the economic upswing that continued almost unbroken until 2012, primarily through a radical re-financing of foreign debt that made private creditors liable and through a policy of strategically undervaluing the peso, which made Argentinian exports more competitive.

Alongside rapid increases in soy exports from 2006 and high levels of private consumption, it was primarily the automotive industry and the telecommunications and software sectors that drove Argentina’s economy. Roberto Lavagna, a centrist candidate in the 2019 presidential elections who stood no chance of winning (in the preliminary elections he received only 8.2 percent of the vote), had laid the foundations for this economic development in his role as minister for economic affairs from 2002 to 2005. According to Lavagna, it was the Kirchners’ policies that led them down the wrong path, with both budgetary discipline as well as the fight against inflation being abandoned following his departure. “In 2005, we were still able to boast a budgetary surplus of 16 billion US dollars.”

Such times are long gone, with the government of Cristina Fernández de Kirchner also leaving deficits in its wake in 2015. This meant there were no means with which to invest. Macri took flight into foreign borrowing and bequeathed his successor a giant mountain of debt.

No Future without Debt Restructuring

One thing is certain: debt restructuring is required. Without it, any kind of economic restart in Argentina is inconceivable. In January 2005, Néstor Kirchner’s government restructured government bonds, exchanging those that had been defaulted on for new ones. This marked the beginning of a new chapter in the long history of Argentina’s national debt. The result of this exchange was a 55 billion US dollar reduction in national debt from around 180 billion to 125 billion. Currently, national debt levels sit at 334 billion US dollars.

Alberto Fernández repeatedly stated that the debt needed to be renegotiated, or else the poor and the middle classes would once again be forced to foot the bill. The first tranche of the historic IMF credit issued in mid-2018 is due in 2020, when Argentina must pay back at least 24 billion US dollars, with a further 31 billion due in 2021.

Where Is This All Headed?

The unavoidable debt restructuring also had a large influence on the programmatic statements of Alberto Fernández and Cristina Fernández. In mid-October, a working group from the Justicialist Party presented a 118-page paper that expands upon Frente de Todoselection manifesto. “Our country needs a new social contract to overcome the deep crises resulting from the Cambeimos government’s policies and which have only become more entrenched since the involvement of the IMF,” the paper stated at the time.

Now, Alberto Fernández and his team want to restore the state’s essential functions, stimulate the domestic market, and strengthen the role of state-owned companies in areas such as natural gas and lithium production, all in order to induce an economic recovery. A broad range of socio-political measures would also be enacted to begin dealing with the social crisis as well.

One such initiative that stands out is Argentina Against Hunger, which Alberto Fernández is seeking to implement “from October 28th” with the help of a broad coalition of actors ranging from church groups and left-wing grassroots organizations to the agricultural multinational Syngenta, which has offered to donate one percent of its production to the programme. “I don’t care where they come from or what their views are; for once, let’s do something together,” he proclaimed when announcing the initiative. “Cristina and I represent those who are struggling, the poorest of the poor.”

In the first TV debate between the six presidential candidates, Alberto Fernández also spoke out in favour of legalizing abortion, a move which had narrowly failed to clear the senate following immense pressure from the church the year before. This turnaround is thanks to the enormous women’s rights movement that is presently advancing Argentine society. Nonetheless, Pope Francis II, who fiercely opposed Macri’s neoliberal programme, is expected to visit his home country following the Peronists’ electoral victory.

A change in government will not result in a shift away from an export-oriented and extractivist economic model, however, with the idea of a socio-ecological transformation completely absent from the Peronist position. They show no interest in environmental issues, and have even less time for the political perspectives of indigenous peoples, the primary victims of racism and environmental exploitation.

Following the example of the USA, the Argentinian presidential system relegates the two-chamber parliament to a secondary role; in addition, state governors, who must retain strong connections with the central administration, have a large influence on “their” representatives and senators, although party whips are largely non-existent. Such a system allowed Macri, for example, to govern comfortably despite lacking a parliamentary majority.

Alberto Fernández’s prospects are even better than his predecessor’s: as the likely vice-president and current senate opposition leader Cristina Fernández de Kirchner will control the senate, close co-operation between the moderate president and the left-wing Peronist seems likely . Unlike in the previous decade, however, when prices for raw materials were booming, there is less to go around, and there is nothing to indicate that the future government wants to take on the country’s wealthy.

The non-Peronist and anti-establishment left exists primarily in the form of the Trotskyist Frente de Izquierda y de los Trabajadores (Workers’ Left Front). Their candidate Nicolás del Caño put up a good fight in the campaign and received a similar share of the vote as he did four years ago (3.3 percent), meaning that a small number of FIT politicians will likely enter parliament again (they currently make up 3 of the 257). At the most recent demonstrations for climate justice in Buenos Aires, Trotskyist flags were the only party-political banners in evidence, although many members of left-wing grassroots organisations voted tactically for Fernández-Fernández.

A Sign of Hope for Latin America

What does a Peronist victory in Argentina mean for Latin America as a whole? Following the victory of Andrés Manuel López Obrador in Mexico in July, it is perhaps another important sign that progressives have not completely forgotten how to win. In terms of foreign policy, they will aim to continue in the vein of the self-aware and pragmatic kirchnerismo position, which played a central role in preventing the creation of the Free Trade Area of the Americas (FTAA) in Mar del Plata in 2005. The policy of Latin American integration, torpedoed by the right, is also likely to be revisited and promoted.

Over the past few decades, however, Latin America’s political constellation has shifted radically to the right, and Mexico it has become clear where the limits of social-democratic realpolitik lie. All the same, Argentina appears to be largely immune to the extreme right-wing tendencies evident in Brazil, even if the country is also experiencing a resurgence in the fundamentalist Pentecostal church. Significantly, Alberto Fernández recently visited Brazil’s ex-president Luiz Inácio Lula da Silva in prison, and has signalled his intention to work towards a diplomatic solution of the situation in Venezuela.

Hardly anyone in South America would profit from a so-called free-trade agreement between the EU and the Mercosur trade bloc (Argentina, Brazil, Paraguay, and Uruguay), and Fernández has also criticized the agreement. As a result, the EU Commission finally finds itself with a negotiation partner that it has to take seriously, and the process of ratifying the agreement may end up being more difficult than anticipated.


[1] José Natanson, ‘Ein tiefer Riss geht durch Argentinien’, Le Monde diplomatique (German edition), 10 October 2019.