Monday, April 24, 2017

Macri's Reforms Are The Best Hope For Argentina

Mauricio Macri’s reforms provide the best hope for Argentina The economics are working but the politics is the weakest point FT View Read next Macri resists pressure to ease Argentina reforms Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Email5 Save YESTERDAY Put it down to personal experience. South America, unlike the US or Europe, seems to have rejected populism. Argentina was the first to do so, in late 2015, when Mauricio Macri unexpectedly won the presidency. Politically centrist, economically liberal and socially conscious, the former businessman is emblematic of a new pragmatism in the region. This has been a refreshing change from the ideology, corruption and mismanagement that characterised many of the “pink tide” populists who came before. Lately, though, Argentina has hit a bumpy patch, suffering protests and strikes. How Mr Macri now manages the turbulence is important for Argentina, a G20 member; more crucially is that his policies and actions may represent a blueprint that could be adapted by reformers elsewhere. In many ways, it is remarkable how popular Mr Macri remains. He inherited an economy riddled with wasteful subsidies, cut off from international credit, bereft of investment, and suffering from currency controls and dwindling reserves. His economic team moved swiftly: it settled with foreign bondholders to restore access to global credit; dismantled currency controls; and jacked up interest rates to tackle an increase in inflation. Despite a recession, his government’s popularity rating remains around 50 per cent. That is quite a feat for a country one year into an adjustment programme. It is all the more remarkable given a series of political gaffes by Mr Macri, such as the unnecessary cancellation of a public holiday. Indeed, his relatively high ratings are at least partly due to the unpopularity of his predecessor, Cristina Fernández. She remains the most visible leader of the opposition Peronists, despite multiple corruption investigations into her affairs and her former ministers. These scandals have profited Mr Macri politically. They have enabled him to cast Argentina’s future as a binary choice: a return to the past with the Peronists, or a new future with his party Cambiemos (Let’s change). Most Argentines seem to prefer Mr Macri’s vision. On April 1, tens of thousands took to the streets, chanting: “We don’t want to go back.” By contrast, a Peronist-inspired general strike the following week had little support. Crucial midterm elections in October will provide a more decisive referendum. Before then, Mr Macri needs a rise in Argentina’s economic feelgood factor. Although the recession has ended, most are yet to feel any benefit. High but falling inflation has cut into real wages, and the popular mood is tetchy. To soothe tempers, Mr Macri has lately slowed cuts in social spending and delayed the end of domestic subsidies. This buys him support but at a cost. The fiscal deficit, at 7 per cent of economic output, is untamed and debt levels are rising. Both have undone too many reform programmes in the past. Every 12 years or so, Argentina, a land of perpetually thwarted promise, receives a second chance; Mr Macri is the latest. His government is the country’s best hope in a generation. Despite some failings, its achievements have been considerable. Its reform programme deserves international support and investment. That includes from the US and from Donald Trump. Still, when Mr Macri visits President Trump in Washington on Thursday, both leaders need to avoid any echo of the conflict of interest scandal that erupted in November when then president-elect Trump reportedly asked Mr Macri, a former business associate, to approve construction of a $100m tower in Buenos Aires. At home, as in Washington, Mr Macri must tread a delicate political path. Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't cut articles from and redistribute by email or post to the web.