Argentina’s President-elect Mauricio Macri will inherit a bankrupt country that hasn’t grown for the past three years and is pretty much isolated from the global economy, but there are four major reasons why he could succeed in bringing Argentina back on its feet.
First, Macri’s election as his country’s first pro-business leader in several years and the fact that Argentina will be the first big South American country to veer back to the center after more than a decade of leftist populism, is already generating excitement in business circles.
Macri, an engineer who will lead a country long-ruled by lawyers, has said that one of his first priorities after taking office Dec. 10 will be restoring business confidence.
Despite Argentina’s booming economy in the 2000s thanks to record world commodity prices, populist policies by outgoing President Cristina Fernández de Kirchner scared away investments. Fernández’s widespread — but unsustainable — social subsidies and her systematic lying about Argentina’s true inflation statistics had generated near unanimous skepticism about Argentina in world markets.
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But Macri’s better-than-expected performance in the Oct. 25 first round elections came as a big surprise, and his subsequent victory in Sunday’s runoff vote has led to a renewed optimism about Argentina. Macri has vowed among other things to restore the Central Bank’s independence and fix Fernández’s discredited INDEC statistics institute, so that the country can once again measure its economy by internationally accepted standards.
Second, Macri has picked a highly respected economic team, which stands in sharp contrast with Fernández’s leftist economic theorists who were seen as neophytes by international debt negotiators and bankers. (A senior official of an international financial institution once said to me about outgoing Economy Minister Axel Kicillof, who did his Phd. thesis on an economic theory, “Would you have surgery with a surgeon who did his Phd. on a medical theory?”)
Third, while Macri will not control a majority in Congress, his government coalition will run Argentina’s three richest and most powerful entities: the federal government, the governorship of the Buenos Aires province — which accounts for about 40 percent of the country’s economy — and the Buenos Aires mayor’s office.
In a country where presidents wield huge powers to distribute funds to the provinces, Macri will have considerable clout to win the support of governors and local officials. As they say in Argentina, he will control “la caja” (he will have the keys to the safe box.)
Fourth, and perhaps most important, Macri will take office at a time when there is a void of economic stars among emerging markets in the world. Wall Street loves to pick emerging economies and fall in love with them, and it usually can only swallow one at a time. And this time, there is no star economy in the emerging world: China’s economy is slowing down, Russia is bankrupt, Brazil’s economy has shrunk by 3 percent this year, and Mexico and India are not quite taking off.
The so-called BRIC economies — Brazil, Russia, India and China — are so depressed that the Goldman Sachs investment bank, whose economists had first coined the “BRIC” term, earlier this month closed its nine-year-old BRIC fund. The fund was losing money, and Goldman Sachs said that it didn’t expect it to show “significant asset growth in the foreseeable future.” While Argentina is smaller than the BRIC countries, it could fill part of the void.
My opinion: Granted, Macri will face formidable challenges. Nearly half of the country voted for the populist Peronist party, and the outgoing government will leave him an empty Central Bank and massive social subsidies at a time when prices of Argentina’s commodity exports are depressed.
But Macri’s win will also trigger a renewed business confidence in Argentina, which may result in growing investments. And Macri, unlike outgoing President Fernández, understands that without investments there can be no growth, and without growth there can be no sustainable poverty reduction.
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Watch “Oppenheimer Presenta” Sundays at 9 p.m. on CNN en Español