Fighting a Losing Battle: Alberto Fernández and a Struggling Argentinian Economy
Originally Published in the December 2019 Journal, Breaking the Silence, Pg. 9
Cristina Fernández de Kirchner (left) with Alberto Fernández (right). Source: WikiMedia Commons
On the night of October 27th, 2019, Alberto Fernández became the new president of Argentina. Fernández, a formerly obscure political strategist and university professor, defeated the incumbent president Mauricio Macri by a margin of 8 percent. While Fernandez and his Vice President, former president Cristina Fernández de Kirchner (CFK) (no relation) celebrated with ardent supporters in Buenos Aires, the festivities quickly came to an end. The same night Fernández declared victory, Argentina’s government imposed stricter capital controls to protect its foreign-currency reserves, as the central bank feared new interventionist policies from the new administration would hurt the market. The slew of economic problems that Alberto Fernández now faces will lead him into a lose-lose situation: he either faces a collapse of the economy for a second time this millennium, or he risks losing his electoral mandate by issuing austerity measures in an attempt to fix the economy.
Fernández’s victory against Macri was not surprising. Any candidate running against Marcri would have most likely won, as the former president was unpopular in the final two years of his administration. At the height of his administration, Marci reached a 37 percent approval rating. During the beginning of his tenure, Macri’s government devalued the Argentine Peso. Consequently, inflation rose, and basic living costs became too expensive for many Argentines. During Macri’s first campaign, he emphasized his promise to alleviate poverty; “zero poverty” became a mantra of his campaign. In reality, the Argentine poverty rate rose from 29 percent to 33 percent under his governance. In an attempt to fix these economic problems, Macri sought the help of Argentina’s boogeyman: the International Monetary Fund (IMF). Macri secured the IMF’s largest loan ever of $57 billion in order to restructure the country’s finances. The IMF is hated by a majority of Argentines, because the ‘prescription’ the fund gives comes with strings-attached austerity measures, and has previously led to economic implosions. After Argentina received the IMF loan, the economic situation in the country worsened. Inflation rates skyrocketed to 50 percent, and it is projected that Argentina’s GDP will decrease by 1.2 percent by the end of 2019.
Macri inherited a problematic Argentine economy from former president Cristina Fernández de Kirchner. The current vice-president led a shambolic populist government prior to Marci’s takeover. She assumed the presidency from her late husband, Nestor Kirchner, in 2007 and remained in office until she was term-limited in 2015, when Marci took power. During her presidency, CFK pushed a populist agenda that focused on providing government assistance to the poor of the country. Her most popular policies included programs such as national child-care allowance and funding the public pension fund. These policies made her very popular among the poor. However, at the start of her second term, Argentina suffered a recession, largely due to rising inflation from increased government spending. During her tenure, controversial actions, such as nationalizing the Argentine airline Aerolineas Argentinas and the Argentina oil company YPF, were regular occurrences in her administration. By the end of the second term, in response to worsening economic conditions, the government began to lie about official statistics, such as inflation. By the end of her 8 years as president, Argentina was teetering on the edge of economic collapse because of worsening inflation rates directly tied to her policies.
Alberto Fernández’s proposed economic policies are vague, but have a real chance of threading the needle between providing necessary aid to the Argentine people and maintaining confidence with the International Monetary Fund. Coming from a populist perspective, Fernández has stated that his plan of action for the loan payment is to renegotiate with the IMF to extend the payment period. By doing this, Fernández is lightening the economic load on his government and giving the economy room to grow without stressing about impending IMF payments. Nevertheless, the president will find a plethora of challenges, political and economic, throughout his presidency.
Alberto Fernández’s problems could start within the government. It has been widely speculated that Cristina Fernandez de Kirchner is playing the long political game and is using Alberto Fernández as a prop to regain political power. She did not run for the presidency directly, because many Argentinians still have a bad taste in their mouths from when she left office. Furthermore, CFK is currently caught in a scandal, in which she is being prosecuted for corruption. The power-hungry populist could have a huge sway as vice president in how the government pursues its policies and political goals. She still has a large base of electoral support that will empower her actions inside the government. She will be pushing an aggressive populist agenda that runs exactly contrary to the wishes of the IMF. Her maligned economic track record when in power could prove to be destructive for this new Fernandez administration.
The IMF is also putting a tight leash on the Argentine government, because they fear it will default on another loan, which would be the second this millennium. Given the current situation, the newly elected president will find very few favorable routes to take his government. Alberto Fernández will have to choose to either follow through on his tough stance toward the IMF, which could lead to economic hardship or even a national default on debt, or he could cooperate with the IMF and risk losing his electoral mandate from the Argentine people.