Argentina

A country which could have a promissory future, however facing many internal difficulties and challenges. Center-right President Macri inherited an economical and political disaster from his predecessor Cristina Kirchner, one of Latin America’s populist and authoritarian political leaders and a close ally of Venezuelan Maduro. Stubborn and corrupt worker unions, radical and aggressive social movements, a bad functioning justice still integrated and badly influenced by disturbing militants of the Kirchner Front of Victory, egoistic local companies with lack of competitiveness and progressiveness, which enjoyed government protection during the 12 years of the Kirchner administration and an opportunistic and small-minded opposition missing to be constructive, contribute to continued political instability. High inflation, an overvalued local currency and a declining spending capacity slowing consumer demand delay the return of the country into growth territory. The government, advancing to reintegrate Argentina back into the world, taking decisive corrective steps to stimulate, activate and normalize the economy, received considerable applause and support from important Foreign Head of States, international political leaders and chief executives of multinationals, increasing foreign commitments, investments and exposures, complementing local private initiatives or occasionally replacing them, comforting the Macri administration, promising there is no return to the past and to continue its efforts pushing the country ahead; the country’s stability and progress may depend finally on the government’s willingness and capability of compromising with remaining major local power players to implement pending essential domestic reforms, like a tax reform and a labor reform and cleaning up the justice system, to reduce risks to fail. The outcome of the legislative election to be held on October 22, 2017, will be decisive for the future of the country and should confirm that the majority of voters continue to support the Macri administration, helping an improving economic outlook for the second half of 2017, despite a still high inflation and a persisting weak consumer spending capacity.  The Peronists, divided into two main groups, the Front of Victory led by former President Cristina Kirchner, leading the parliamentary opposition to Macri’s administration, and another group composed of politicians of dissident Peronists from the Justicialist Party, the largest Party in Congress, and the Renewal Front of Sergio Massa, forming an alliance with Margarita Stolbizer’s Progressive Party to improve their chances in the coming legislative election, are not expected to obtain sufficient votes to be able to introduce political changes or reverse the economical reforms introduced by the Macri government. Argentina failed to win back its status as an emerging market in the influential MSCI benchmark equity index, relegating the country to the ranks of frontier markets for at least until 2018, contrasting the MSCI’s decision with Argentina’s success to issue a $2,75 Billion 100-year bond; the downgrade to frontier market status has been caused during the former restrictive populist Kirchner administration and the MSCI wants to be sure that Macri’s open market policies will be irreversible, waiting to see the results of the important midterm legislative elections in October 2017, still influenced by the campaigning former President Cristina Kirchner, introducing her new left-wing alliance called ‘Unidad Ciudadana’, opposing Macri’s economic reforms, which she claims are hurting the poor, launching her bid for a Senate seat and breaking with Peronism; a still more divided opposition could help Macri’s coalition for a strong showing in the coming elections, not expected to change the actual balance of power in Congress, and improve his chances to seek re-election in 2019. Obtaining Cristina Kirchner a seat in the Senate would give her immunity from arrest, but not from trial, advancing investigations of accusations of wrong doing and corruption related charges against her. Renewal Front’s Massa success strategy seems to be polarizing with former President Cristina Kirchner seeking also a Senate victory to stop her as he did winning in 2013. Kirchner won narrowly the mid-term primary elections against Macri’s candidate Bullrich and also a possible second-place finish in the October 22, 2017 election would still grant Kirchner a seat in the Senate, from where she likely will lead a most uncomfortable opposition intending to stop planned Government reforms, what advancing investigations and trial, even an eventual prison sentence against her could interrupt, cautioning her candidacy many investors; senator Pichetto, president of the Peronist/Front of Victory party bloc, already signaled that Cristina Kirchner, if elected to the Senate, will have to form her own bloc; after a strong general showing of Macri’s ‘Let’s change’ coalition in the mid-term primary elections his Government is facing the coming October challenge with confidence; but no matter how many seats he will be able to pick up he will still lack a majority and has to continue seeking, building and strengthening alliances to pass necessary reforms. A second place finish in the October 2017 election is granting Cristina Kirchner a Senate seat, giving her immunity from arrest but not from trial, and advancing legal procedures may still frustrate and limit her political ambitions. A sweeping and notably victory of the ‘Let’s Change Coalition’ in nearly the whole country allows to increase its seats in the House and the Senate, pressing and calling President Macri for a basic consensus to push ahead with tax, labor and pension reforms, as well as reforms of the country’s justice system to combat more efficiently corruption, seeking with governors to achieve a fiscal balance. Elisa Carrio and Cristina Kirchner , totally opposed political players, both tolerated and also used by the Macri-Government, likely underestimating the problems they can cause to the administration given their renewed influence and political power. Elisa Carrio, founder of the political movement ‘Civic Coalition ARI’, is actually a fundamental part of the ‘Let’s Change’ coalition, accustomed to express publicly her opinion about what’s wrong and what’s right and what and how it should be done, worrying not only the opposition but also the government. Cristina Kirchner, accused also on treason, asking a federal judge to lift her immunity from arrest as newly sworn in senator, facing also charges in several corruption investigations, creating her own political movement ‘Citizens’ Unity’ and dividing Peronists, may not be able to enjoy her role as a potential opposition figure, as she will have to face a difficult and long battle with justice. After violent protests pushed by opposition legislators, identified also as Kirchner supporters, battled to stop a congressional session on the pension reform, intending to destabilize the government, and Cristina Kirchner’s first appearance in the Senate, seen as destructive and full of hate, breaking congressional rules, her image is suffering a further deterioration, which could damage still more her remaining political influence. President Macri, recovering the initiative, leaving no doubt about his firmness and determination to fight for the pending reforms to overcome the worst legacy of the Kirchner administration, pushing grows and seeking above all to reduce deficits, stabilizing public finances and balance budget, counting on the approval and help from foreign economic powers, including the U.S. Trump administration. President Macri, seeking to position himself for re-election in 2019, delays necessary labor reform to avoid further confrontations with unions. Declining purchasing power, stagnating growth, a still uncontrolled inflation and a very high, still increasing debt level are seen as obstacles to reach a major economic recovery, making it doubtful if the government will be able to fulfill its goals, implementing all the mandatory reforms and secure re-election in 2019. During his second speech to Congress since he was elected, President Macri tried to transmit optimism, willingness to overcome difficulties, defending pending reforms, confirming that the country’s economy surged 4,1% in January 2018 compared with the same month of 2017 and the poverty rate fell to 25,7% in the second half of 2017 from 28,6% in the first half of the year and 30,3% in the second half of 2016, but overshadowed Macri’s market friendly policies designed to cut fiscal deficit, reduce inflation and attract foreign investment, by a persisting high inflation elevated due to additional increases in the prices of electricity, gas, transportation, communication and prepaid medicine, reducing again spending capacity of consumers, expecting actually analysts 2018 will be still ending with an inflation of above 20%. After not very successful interventions of the Central Bank to stop the Peso sinking and to help slow down inflation, mowing rates up to growth depressing 40%, Argentina finally returns again to the IMF, seeking financial assistance, like a Standby Credit Facility to address the Peso volatility and regain the confidence of investors, hoping its program of adjustment and reforms gets back on track in time for the Presidential election late 2019, counting with little or no constructive help from a still deeply divided opposition. President Macri vetoed the law seeking to freeze utility rates agreed by an unified Peronist opposition, including followers and non-followers of Cristina Kirchner, saying there was no way the budget can stand an additional 1% of GDP, complicating still more a political relation with the divided opposition and increasing tensions with labor unions and social movements. Index provider MSCI finally reclassified Argentina as an emerging market, coming the reclassification just hours after the IMF approved a $50 Billion financing deal for Argentina as the country seeks to stabilize its currency. The IMF $50 Billion Stand By facility is considered as a political gesture to support the Macri administration, helping to avoid the return of populism in Argentina; however stagnating growth, an out of control and run away inflation, the pressure of a strong Dollar, the elevated fiscal deficit, high foreign debts and a critical social climate require very conscious economic measures and corrections, discipline and more consensus, and do not permit arrogance and new errors, without putting at risk a possible re-election of President Macri in 2019. President Macri is obliged to resolve the fiscal deficit, meaning the government is forced to accelerate austerity rising recessionary tendencies, and to deal with the continuing lack of productivity of the Argentine economy, as he seemed to have lost the political capital to carry through the much-needed labor reform.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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6 Responses to “Argentina”

  1. shahspandan Says:

    Follow me I will follow you! Please let’s help each other!!

    Liked by 1 person

  2. Brooklyn's Corner Says:

    When I first started reading, I thought you were from the US. God help our leadership. Just started following.

    Liked by 1 person

  3. Aman Thakur Says:

    Nice…

    Liked by 1 person

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