Argentina's Road to Recovery

BY ROGER F. NORIEGA

AMERICAN ENTERPRISE INSTITUTE 

Key Points

Mauricio Macri, who will become Argentina's president on December 10, is moving decisively to apply free-market solutions to restore his country's prosperity, solvency, and global reputation.

Success of Macri's center-right agenda could serve as an example for many Latin American countries whose statist policies have produced ailing economies and political instability.

As Argentina recovers its influence in favor of regional democracy and human rights, the United States must step forward to support these causes in the Americas.

Introduction

The November 22 election of Mauricio Macri, a center-right former Buenos Aires mayor and business executive, as president of Argentina presents a pivotal opportunity to vindicate free-market economic policies and rally democratic solidarity in the Americas. Although Argentina's $700 billion economy is ailing, it remains the second largest in South America; if Macri's proposed reforms restore growth, jobs, and solvency, he could blaze the trail for other countries whose economies have been stunted by socialist policies. And if he follows through on his pledge to invoke Mercosur's democracy clause against Venezuela's authoritarian regime, Argentina could help lead the region away from the authoritarian caudillos (strong men) who have dominated the last decade.

"After a decade of US-Argentine relations dominated by the provincial and prickly Kirchners, US interests in the region stand to benefit from more constructive leadership in Buenos Aires."

After the election of Hugo Chávez in Venezuela in 1998, a mix of populism, socialism, and corruption emerged under leftist leaders in Bolivia, Ecuador, El Salvador, and Nicaragua.[1] Even Brazil and Chile have been affected by this trend. In Argentina, President Néstor Kirchner (2003-07) and his wife and successor Cristina Fernández de Kirchner (2007-15) employed authoritarian tactics and corruption that polarized politics and stunted economic growth.[2] Daniel Scioli, Macri's opponent and the Peronist "Front for Victory" candidate, tried to distance himself from the incumbent, but many Peronists who rejected the Kirchners' heavy-handed tactics ended up giving Macri the votes he needed to win the presidency.[3]

Because the results were much closer than pre-election polls predicted, Macri does not have the momentum that a landslide victory would have produced, and the Peronist opposition may bounce back quickly to block significant reforms. A successful two-term mayor, Macri will have his political skills tested as he rallies the public, the powerful provincial governors, and moderate Peronists to rescue the country's economy. The team around the president-elect has signaled his intention to immediately implement a flurry of executive actions to project an image of decisiveness, energy, and change. Macri knows that he must choose his battles carefully-leading with measures that will broaden his base rather than provoke unruly opposition.

After a decade of US-Argentine relations dominated by the provincial and prickly Kirchners, US interests in the region stand to benefit from more constructive leadership in Buenos Aires. If Macri is able to demonstrate the value of free-market policies and overcome ideological polarization, Washington may find resurgent partnerships in the Americas-if the Obama administration chooses to pay attention.

The Campaign and Election

Last month, Mauricio Macri became the first man in a century from a party other than the two political bastions, the Peronist Justicialist Party and the Radical Civic Union, to win the Argentine presidency in free elections. His election produced a sea change in the country's politics by rejecting the standard bearer of the powerful Peronist establishment, Daniel Scioli. The 51.4 percent to 48.6 percent result was closer than was predicted by numerous polls taken on the eve of the election, exposing the country's deep polarization over the 13-year Kirchner legacy.[4]

In his victory speech, Macri declared, "What happened today changes the politics of this country."[5] Indeed, the imperious governing style of the two Kirchners was just as controversial with many voters as their faltering economic program.

The Kirchner administrations-governing from the left wing of Peronism-funded a robust welfare state by taxing the country's productive sectors, restricted exports and controlled consumer prices to placate domestic demand, imposed currency controls that suffocated commerce, defied bondholders who refused offers made by Argentina after its 2001 default on sovereign debt, manipulated economic data to mask inflation and the other failings of statist policies, and aligned the country with controversial regimes in Venezuela and Iran.[6] The independence of the judiciary and the media were targets of relentless attacks by the Kirchner administrations.[7]

For more than a decade, the wily and irascible Kirchners brilliantly managed their political coalition and outmaneuvered their opposition. Initially, the benefits of the large welfare state grown by the Kirchners sustained their popularity. However, the underperforming economy and falling commodity prices have taken their toll. The negative economic impact of the government's policies has become increasingly pronounced in recent years-fueling inflation, widening the deficit, weakening the job market, and leading to heated legal battles with creditors and investors. The government's attempt to deal with these economic maladies while maintaining its political control has begun to affect the average Argentinian's daily life.

The shifting polls during the last six months and the close final results show that Argentina's voters may have settled for genuine but incremental change. Six months ago, the moderate Scioli was running well ahead of Macri, with voters opting for Peronism's signature brand: stability. Although Scioli's national political career began as vice president under Néstor Kirchner (2003-07), he has established his own identity as the governor of the important province of Buenos Aires (2007-15).

Scioli sought to rally the country's powerful Peronist base by advocating continuity, with modest changes in temperament and governing style rather than in policies and programs; in the final debate, he accused Macri of planning to gut the social programs that are the legacy of Peronist rule.[8] Running with the new coalition Cambiemos (Let's Change), Macri distinguished himself from Scioli (and from Kirchner) by promising a new direction for the country featuring free-market economics, fiscal responsibility, and foreign policy-favoring reconciliation with the United States over close ties to Venezuela and Iran. Macri promised to implement business-friendly reforms to promote growth and restore investor confidence, while protecting many of the popular social welfare programs.

Polling shows that Argentinians are unhappy with the economic repercussions of bloated public spending and excessive government control, but they are not necessarily opposed to the policies and programs themselves. Additionally, the close election indicates that many in Argentina do not trust the policies of a center-right candidate such as Macri, despite his moderate track record.

Many voters also may recall the economic and political turmoil that took place under the country's most recent non-Peronist presidents, Raúl Alfonsín (1983-89) and Fernando de la Rúa (1999-2001), both of whom were forced to leave office early after public protests over austerity measures. During the recent campaign, Kirchner stalwarts aggressively fanned those fears, further perpetuating a narrative that the right could not be trusted to govern fairly or effectively.[9]

Scioli did his best to paint Macri as a dangerous choice for Argentina, suggesting that he would do the bidding of the International Monetary Fund (IMF)-an institution voters associate with unpopular austerity measures and economic collapse. Macri dismissed these attacks as a symptom of the toxic political environment fostered by the Kirchner administration. Instead, he emphasized an optimistic message about reforms that would unlock the country's economic productivity and prosperity.

Apparently, in the last crucial months before the presidential elections, Macri's campaign did a more effective job convincing voters of his moderation than Scioli's did touting his independence from Kirchner. Ultimately, the Argentine electorate, weary of the economic stagnation and the authoritarian tactics and corruption of President Kirchner and her inner circle, opted for the authentic change Macri offered.

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Notes

Howard LaFranchi, "Hugo Chavez Legacy: A Wedge between US, Latin America," Christian Science Monitor, March 5, 2013,www.csmonitor.com/USA/Foreign-Policy/2013/0305/Hugo-Chavez-legacy-a-wedge-between-US-Latin-America-video.

Jonathan Watts, "Scandals, Protests, Weak Growth: Is Latin America's Left in Retreat?," The Guardian, March 21, 2015,www.theguardian.com/world/2015/mar/22/latin-america-left-tough-times-brazil-argentina-venezuela.

Marcelo Veneranda, "Sergio Massa: 'El problema es de Scioli si no puede romper con el kirchnerismo'"[Sergio Massa: "The Problem Is Scioli's If He Can't Break with Kirchnerism"], La Nación, October 28, 2015,www.lanacion.com.ar/1840399-sergio-massa-el-problema-es-de-scioli-si-no-puede-romper-con-el-kirchnerismo.

Roland Lloyd Parry, "Divided Argentina Awakes to Post-Kirchner Era," Yahoo News, November 23, 2015,www.news.yahoo.com/scioli-admits-defeat-macri-argentina-vote-004552154.html.

Mauricio Macri, Presidential Campaign Victory Speech (Buenos Aires, Argentina, November 22, 2015).

James Roberts, Holding the Kirchners Accountable for Argentina's Economic Freefall, Heritage Foundation, March 4, 2011,www.heritage.org/research/reports/2011/03/holding-the-kirchners-accountable-for-argentinas-economic-freefall.

Jonathan Gilbert, "Showdown Looms between Argentina's Kirchner and Her Biggest Media Critic," Christian Science Monitor, December 5, 2012, www.csmonitor.com/World/Americas/2012/1205/Showdown-looms-between-Argentina-s-Kirchner-and-her-biggest-media-critic.

Richard Lough, "Argentina's Macri Seen Unscathed from Humdrum Presidential Debate," Reuters, November 16, 2015,www.reuters.com/article/2015/11/16/us-argentina-election-idUSKCN0T51UD20151116#FSxL8fRVZ18gTYgG.97.

Juan Carlos Hidalgo, "What to Expect of Argentina's New President," Cato Institute, November 23, 2015,www.cato.org/blog/what-expect-argentinas-new-president.