As if addicted to fiscal trouble and economic pain, Argentina has voted to hand the reigns of power once more to the left, which did so much damage to the economy when they were last in power. The new president is Alberto Fernandez and vice president is Cristina Fernandez de Kirchner, who was in power with her late husband Nestor Kirchner from 2007-15. The Conservative incumbent, Mauricio Marci, leaves after 4 difficult years.
Marci lost because he failed to effectively deal with a growing economic crisis and a plunging Peso. He began his term in 2015, the year after Argentina had defaulted on its US Dollar denominated debt. He inherited inflation running at over 30%, despite manipulated official figures showing much lower, and a large public deficit, despite the previous government having pushed taxation to the highest level in the country’s history. Compounding the problems were falling commodity prices. Argentina’s exports rely heavily on agricultural products like wheat and soybeans. A gradual approach to reforms saw little return and Marci failed to cut public spending. He inevitably accepted a bailout from the IMF in 2018 and eventually was forced to ask creditors for more time to pay back Argentina’s $101bn of foreign debt. A run on the Peso saw currency controls re-imposed in August. All in all, Marci left the country in no better state than when he took over. With the new government, little will change. Troubles are set to continue.
The root cause of Argentina’s woes is the same that is plaguing so many other troubled economies in the developing world: a stifling environment of regulations, currency controls, price controls, subsidies and high public deficits and inflation. Argentina ranks a woeful 148th in the Heritage Foundation’s Economic Freedom Index, with a score of 52.2, categorizing it as a ‘Mostly Unfree’ economy. In the OECD’s Ease of Doing Business index Argentina ranks 117th.
The answers to Argentina’s troubles are obvious: deregulation and market oriented reforms, an end to subsides and price controls and bold tax and spending cuts. But like in so many other South American countries, successive governments have failed to act, as left-wing populism continues to seduce the electorate. It seems that no matter who resides in the Casa Rosada, the official residence of the President, the people who are mindless enough to put them there lose out.