The tough economic situation in Argentina was the central issue in the electoral campaign for the presidential elections on Sunday, but it will undoubtedly also play a crucial role in determining the country’s future. The Macri government has concluded loan agreements with the IMF, with painful conditions attached. One year ago, one euro was worth around 40 Argentinian pesos, but now the exchange rate has gone above 65. We spoke about the country’s situation with Martin Kalos, Chief Economist for the Elypsis consulting agency.
How do you explain the new economic crisis in Argentina?
What explains it is the lack of a clear policy on production, which has led to a lack of future prospects for companies. There is also a clear stall in exports. The internal market has collapsed because of the 20% fall in wages over the last four years. Foreign investment has mostly failed to materialize, not least because boosting production via investments makes no sense in the absence of a market.
Has the incumbent government’s economic policy been bankrupt?
I believe there is now a general consensus among economists, whatever their degree of closeness to the president, that Macri’s economic policy has been negative. Poverty has increased, inequality has increased, as well as unemployment and the destruction of skilled labor in the industrial sector. I think there was an ideological bias that prevented the government from seeing the risks of a markedly neoliberal economic policy.
What will be the role of the IMF after these elections?
The Fund has a political outlook that is very close to that of the Macri government, probably quite different from that of the future government, which will have other priorities in economic policy—i.e. a less neoliberal one. We must seek agreement around the kind of structural reform that the country can and will undertake, so that the IMF would agree to negotiate new deadlines, including renegotiating those which have been agreed for 2020.
Will the next government have the possibility to implement social policies to alleviate the current situation?
Argentina has one of the sturdiest built social safety nets among countries with medium-high incomes. Ninety percent of people retirement age are able to retire, and a universal subsidy for each birth to guarantee health and education is enshrined in law. The social safety nets do exist, but they don’t guarantee a decent standard of living. What is missing is quality jobs. The problem is not whether the next government will make progress in terms of social policies, but rather whether it will be able to implement production-focused reforms which would make such social policies less necessary and urgent.
What role might the popular economies play for the upcoming Alberto Fernandez government?
Macri has viewed this sector as one to be contained with subsidies provided through the Ministry of Social Development. However, at the same time, he dissolved the State Secretariat for Family Agriculture, which was one of the forms of productive expression for the workers in the popular economies. I think that in this area, one can envision a consensus on the policies to be pursued, such as a new board for prices and wages, which Alberto Fernandez will definitely propose in the first months of his government. The problem is how he will manage to include these policies within a general production-focused policy whose contours are yet unclear, while in the midst of a crisis that has not yet ended. Obviously, the uncertainty also extends to the role the social movements will play.