Ask most people if Argentina is about to break a losing streak spanning more than half a century in order to produce sustainable economic growth, and they’ll probably laugh out loud.
Yet this is the position defended by the Minister of the Economy Martín Guzmán, who a few weeks ago played a leading role in a series of meetings held at the Casa Rosada aimed at aligning relative prices through so-called sectoral agreements, to the point where the leaders of the country’s most important companies gave him, and him alone, a standing ovation during a meeting attended by several front-line members of President Alberto Fernández’s cabinet. While the business leaders applauded – it should be noted that the Argentinian “titans of industry”, including Paolo Rocca and Luis Pagani, abstained from attending, sending their number two instead – Guzmán a presented its macroeconomic plan to revive the economy through a five percent point. reduction in inflation, which would allow wages to exceed prices, creating a virtuous circle that would help reduce the public deficit. To the amazement of Chief of Staff Santiago Cafiero and his colleagues to see the private sector applaud their political plans, the quiet Guzmán won another round of victory by consolidating his status as first among peers in Cabinet, first obtained after the successful sovereign debt restructuring, which earned her a seat alongside none other than Cristina Fernández de Kirchner last April when the Fernández-Fernández administration publicly displayed its first major political victory.
Guzmán’s appeal stems from a technocratic approach to the realm of public economics, coupled with a soft but convincing, almost stubborn conviction in his plan. His theory and practice seemed unpolluted by our own brand of political ideology which reinforces the antagonism between extremes and is one of the underlying causes of “Argentine amateurism”. Whether or not one agrees with his political positions, Guzmán has seemed to shatter the “grieta”, the deep polarization that defines Argentine politics and tears the nation apart at its seams. Theoretical coherence and the sobriety of speech have given the Minister of the Economy symbolic capital and credibility, which are essential tools to repair the mess that is the Argentine (im) productive apparatus.
So, it was surprising to see the Columbia University academician breaking with his usually moderate criticism of the previous administration to apparently identify the government of Mauricio Macri as the root cause of the country’s economic mismanagement. In a televised interview with journalist Marcelo Bonelli the day before his meeting with the CEOs, as Guzmán laid out his plan, he repeatedly went back to the failed policies of the administration 2015-2019, in particular the emergency loan Macri obtained from the Fund international monetary policy. At one point, Guzmán questioned the interviewer, asking where the US $ 44 billion the country had received in the form of the largest stand-by deal in history had gone. “I don’t know, part of it went to capital flight, and part of it to build up reserves,” Bonelli mused in response. “The entire infrastructure of the nation could have been rebuilt. There is nothing left, ”replied the Minister.
This has aroused the ire of several economists close to the Macri administration. Former Minister of the Economy Hernán Lacunza – another one of those peculiar politicians who is respected on both sides of the “grita “ – tweeted that debt levels before and after the IMF bailout remained stable. “It was not stolen [sic]. it did not increase [the debt pile]. It was used to pay off the previous debt (of this administration and the previous one), shorter [maturity] and more expensive. Some for public works, some to finance the 2015 inertial deficit. ”Sebastian Galliani, former vice-minister of the economy under Nicolás Dujovne, was more aggressive: he criticized Ms. Fernández de Kirchner for leaving a eight percent deficit, while claiming that during his second term, CFK spent $ 60 billion in grants (half of which only in 2015, an election year). “We could have urbanized all the informal housing in the country,” he added.
There is no doubt, however, that the Macri administration has failed miserably on its main campaign promise: zero poverty. The economy imploded under Macri, proving its fragility in the face of a scramble in emerging markets in 2018, weak both due to structural problems and self-inflicted injuries. It is also undeniable that the IMF, led by Christine Lagarde and at the behest of Donald Trump, recklessly loaned Argentina a shipment of money under fragile premises of debt sustainability due to ideological affinities and out of fear. of a return to the worst days of Kirchnerismo. . It should also be undeniable that Macri received a time bomb from CFK after her ruinous second term, in which she looted every corner of the state to fund an expired model of populist consumer capitalism that led to stagflation. , isolation and social division. Cristina and Macri were horrible presidents for Argentina, but rarely in our history have we had a positive note in the economic record.
Take an extract from Lacunza’s “2015-2019 political report”: “Poverty, unemployment and inflation were not born with this administration: since 1984, average poverty has risen to 36% of the population (according to current measures), inflation is 68 percent on an annual basis (excluding episodes of hyperinflation), unemployment is at 11 percent, and output has fallen in 15 of the 36 democratic years. The “Alfonsinist“To dream that ‘we feed, care for and educate with democracy’ has remained an implacable challenge since 1983.”
From a theoretical point of view, Guzmán’s plan is solid. His reading is that the structural lack of export growth has not allowed Argentina to grow, given its inability to increase its imports. The lack of dollars ultimately puts pressure on the balance of payments, which then triggers depreciations that fuel inflation. This is financed by debt or money printing, which leads to a vicious cycle. Its solution is a multi-year multi-pronged plan aimed at correcting macroeconomic imbalances by using the state as a counter-cyclical tool to achieve economic growth by focusing on productive sectors while reducing the budget deficit and the Central Bank.
Putting this into practice seems difficult, but it will be even more difficult if, playing for the electoral needs of the Frente de Todos coalition, the minister oversteps his role and enters the political arena. It’s unclear if his plan will work, but he’s much more likely to fail if he starts to alienate the opposition.