MercoPress. South Atlantic News Agency
Argentine Peso and equities end the week back on skid row
After a week of relative stability, the Argentine peso slid more than 2.5% percent on Friday, as an economic crisis marked by high inflation, wobbly growth and an outflow of capital began to bite again. Read full article
Comments
Disclaimer & comment rulesWhat the world is witnessing now in Argentina is the result of the blind application of every single neocon recipe -- without regard for the world's current trends.
Jul 02nd, 2018 - 11:53 pm - Link - Report abuse -1In parallel, members of the government have been extremely busy ensuring they make enough dough to support themselves and several generations of their families going forward. Not bad for Nikky Caputo, Juanjo Aranguren and other friends of the president.
The combination of both factors has accomplished the feat of bringing Argentina, in barely 30 months, to a position of international beggar -- which of course won't stop its accelerated race to economic and financial crisis.
I get many islanders will probably enjoy seeing a country they hate sinking to the bottom.
However, Argentina has shown in the past it can overcome its worst periods - and it comes back with a vengeance.
Reekie,
Jul 03rd, 2018 - 05:14 pm - Link - Report abuse +1“However, Argentina has shown in the past it can overcome its worst periods - and it comes back with a vengeance.”
You have a track records of making claims without supporting evidence but this one must take the biscuit!
Read http://archive.economonitor.com/blog/2014/02/argentina-the-myth-of-a-century-of-decline/ for an interesting and informed opinion.
That's a very interesting article, since instead of blaming Peron and populism for Argentina's decline in fortunes, it blames the military government instead. Them going after Peron's main supporters and the universities to stifle opposition, and damaging Argentina's manufacturing and knowledge base as a consequence seems pretty plausible.
Jul 03rd, 2018 - 10:18 pm - Link - Report abuse 0@DT
Jul 04th, 2018 - 04:40 pm - Link - Report abuse -2Very interesting article indeed, and thank you kindly to ZB for providing a link to it. I noted the following excerpt:
“...it was the subsequent military coup of March 1976, which aiming at stamping out the Peronist Party and its followers...started to dismantle the manufacturing base that was supposed to give the Peronist Party its loyal labor base, generated the debt explosion that led to the 1980s debt crisis...”
Wow. Anything resembling the current situation coming to mind?
@EM
Jul 04th, 2018 - 05:42 pm - Link - Report abuse 0I think this bit is also very relevant to the current situation:
“In summary: the problem of Argentina is not to reverse hundred years of decline but to finally heal the political, social and economic wounds of the military coup of the mid 1970s.”
Macri's election appeared to be a part of this process, as the first non-Peronist president to be freely elected in a long time. But I think his presidency may have increased the fractures in Argentine society, what with the repression of demonstrations, and the death of Maldonado showing people still distrust their government.
@ZB
Did the article change your mind in any way on Argentina's problems?
DT,
Jul 05th, 2018 - 05:01 pm - Link - Report abuse +2“Did the article change your mind in any way on Argentina's problems?”
Yes, I think it did. The default response on here is that all of Argentina's problems originated and are perpetuated by Peronism. This article indicates that the problems originated later with the military coup, but I wonder to what extent Peronism has held back the healing process.
My wife commented to me today that CFK has created an angry youth in Argentina who complain, often violently, about absolutely everything. They are now complaining about a new organ donor law that means that you are by default a donor unless you opt out. Why are they complaining? If you don't want to donate then just opt out and stop making crazy claims about Macri stealing your organs!
Although Reekie is somewhat ancient, I include him as part of the angry youth created by CFK.
I'm glad to see you have an open mind. I agree it's the default idea on this site that Argentina's problems are due to Peron, and, perhaps, to the ordinary workers being too 'greedy' in wanting a better life, and unwilling to suffer hardship for the supposed good of the economy (which strangely never seemed to materialise).
Jul 05th, 2018 - 07:52 pm - Link - Report abuse 0After watching Macri take over from CFK, I wonder if part of the problem may be too much ideological extremism. Eg, the sudden devaluation of the peso, changing rapidly from a policy of protectionism under CFK to open markets under Macri, going from overly high taxes on agricultural exports to no taxes, switching between nationalising and privatising large companies (with opportunities for corruption each time)... how can anyone plan for the future when they get the rug pulled from under them like that? A suboptimal policy might well be better as long as it's consistent.
Also look how many people distrust the respective governments, with one side suspecting CFK ordered Nisman's death, and the other that the Gendarmerie killed Maldonado and covered it up with the connivance of Macri's government. I wonder if it is things like these that the author is talking about when he mentions healing the wounds in society? I suspect this may also be one root of the complaints over the organ donor law. If you trust the government to implement it fairly and respect your wishes, that is one thing, but if not...? Much easier to ignore people's desires with an opt-out than an opt-in policy.
Finally, considering Enrique lived through the dictatorship, and for all I know left his homeland because of it, I'm sure any anger he holds long predated CFK.
DT,
Jul 05th, 2018 - 09:08 pm - Link - Report abuse +1“After watching Macri take over from CFK, I wonder if part of the problem may be too much ideological extremism.”
I think there is a lot in that.
“Eg, the sudden devaluation of the peso,”
I think that the peso had already devalued. Remember the blue peso? When he let the peso float it simply adjusted to the true market value of the blue peso. So although the official peso devalued under Macri, it had already devalued under CFK.
”changing rapidly from a policy of protectionism under CFK to open markets under Macri, going from overly high taxes on agricultural exports to no taxes, switching between nationalising and privatising large companies (with opportunities for corruption each time)... how can anyone plan for the future when they get the rug pulled from under them like that? A suboptimal policy might well be better as long as it's consistent.“
Yes, but he sold it as a gradual change and some would say that he didn't do enough fast enough. I don't know, I am not an economist.
”Also look how many people distrust the respective governments... I wonder if it is things like these that the author is talking about when he mentions healing the wounds in society?“
Yes, I think that this is a large part of it.
”Finally, considering Enrique lived through the dictatorship, and for all I know left his homeland because of it, I'm sure any anger he holds long predated CFK.”
Good point, but he clearly does not like Macri. ;-)
RE the peso, those dollar futures they are suing CFK over resulted in a big loss for Arg because Macri devalued immediately. AFAIK if he had waited this could have been avoided.
Jul 05th, 2018 - 10:04 pm - Link - Report abuse 0It's true he sold the changes as gradual, but he dropped the export taxes immediately. This ought to help farmers but it would take a few years to reverse the decline under CFK, whereas the drop in revenue occured immediately and meant more borrowing. He was unlucky with the drought, but it will always be risky to rely too much on agro-exports.
As for the tariffs on imports and the fuel subsidies, that was the environment businesses had adapted to. Maybe some would never be able to survive without those things, but it would take time to replace them with others that could. And others could have adapted if they'd had a few years to do it, but they didn't get the chance. We're often told that businesses in Argentina are inefficient because of the lack of competition, and that is not something that can be fixed overnight.
Anyway, I'm not an economist either, and I still think Macri inherited a very difficult job. Only now I also think that he has not handled it well.
RE trust in government, if I was in charge I would make it a priority that justice was not just done, but seen to be done. If the police are accused of using excessive force, investigate it promptly, and if they may be biased, get independent investigators from a different force. If a minister is involved in something dodgy, fire them. Don't let ministers make decisions if they could benefit personally. One of the good things Macri did was restore the statistics on the economy etc which let people judge how things are going.
As for Enrique, he's been prophesying doom and gloom about Macri since the beginning, and let's be honest; events seem to be proving him right. Even if Macri can still turn things around, he's burdened Argentina with a lot of debt and a new loan from the IMF that reduces their control of their own economy.
DT,
Jul 06th, 2018 - 06:28 pm - Link - Report abuse 0“It's true he sold the changes as gradual, but he dropped the export taxes immediately. This ought to help farmers but it would take a few years to reverse the decline under CFK, whereas the drop in revenue occured immediately and meant more borrowing.”
Good point.
“As for the tariffs on imports and the fuel subsidies, ... others could have adapted if they'd had a few years to do it, but they didn't get the chance. We're often told that businesses in Argentina are inefficient because of the lack of competition, and that is not something that can be fixed overnight.”
True.
“I still think Macri inherited a very difficult job. Only now I also think that he has not handled it well.”
I agree. It is also my impression that he hasn't explained his actions very well.
“...if I was in charge I would make it a priority that justice was not just done, but seen to be done.”
Absolutely.
“One of the good things Macri did was restore the statistics on the economy etc which let people judge how things are going.”
Agreed.
“As for Enrique, he's been prophesying doom and gloom about Macri since the beginning, and let's be honest; events seem to be proving him right.”
Yes. I think Macri has done the right things but in the wrong way, not gradual enough as you say etc. The problem is that if he can't turn it around (and he has on some economic indicators-but I don't know if they are the best ones at this stage) will his eventual replacement take a middle road to ease some of the pain or will there be a knee-jerk response back to the lunacy of Kirchnerism or similar?
It feels weird having you agree with me. ;)
Jul 06th, 2018 - 10:07 pm - Link - Report abuse 0Judging by previous form, we should probably expect another sudden reversal from whoever gets in next. I think the law in Argentina only forbids 3 consecutive terms, so CFK could even stand again herself. But I don't honestly have much of an idea who might be an option.
Although Macri sounded good I'm not even sure he did the right things. Argentina hasn't risen much on the 'Ease of Doing Business' ranking since he took over, and those kind of reforms would not have required him to borrow more money and might have helped Enrique's famous 'small and medium sized enterprises'.
It's true some economic indicators have improved, but an increasing GDP is not so useful if it doesn't translate into more jobs and a smaller deficit. Anyway, countries are always vulnerable to what is going on in the rest of the world, and the high debt now makes Argentina more vulnerable. I suppose that is what caused the recent crisis with the peso.
@DT @ZB
Jul 09th, 2018 - 05:05 am - Link - Report abuse 0Looking at the thread above, I was pleased to see rather what looks like a brainstorming and dialogue rather than confrontation.
It is true, as ZB wrote, that I do not like Mauricio Macri, but my personal taste is largely irrelevant -- what counts is whether the man's political assessment, his views and his political organization was on target -- and I do believe he is much worse than I anticipated.
I would have preferred to be proven wrong and that the Macri presidency be a success. The well-being of forty-four million people is much more important than any individual's ego, including my own.
What is important now is to realize that the ugly “D” word is surfacing often in conversations as the country's economy approaches a terminal phase.
Macri's economic and financial decisions have brought the country to the edge in a very short time by de-financing the state, exacerbating the country's endemic fiscal disbalance, and paying for the party with the credit card. He and his associates also found time to perpetrate a shameless looting of the country's resources for their personal benefit.
Pretty soon they will be running for the door, asking for the last one to turn off the lights.
DT,
Jul 09th, 2018 - 06:10 pm - Link - Report abuse 0”It feels weird having you agree with me. ;)”
I don't keep track, but I think I've often agreed with you. Maybe my agreement was usually silent. ;-)
“Judging by previous form, we should probably expect another sudden reversal from whoever gets in next.”
Am I allowed to agree again? ;-)
“Although Macri sounded good I'm not even sure he did the right things. Argentina hasn't risen much on the 'Ease of Doing Business' ranking since he took over, and those kind of reforms would not have required him to borrow more money and might have helped Enrique's famous 'small and medium sized enterprises'.”
I think he did some of the right things but maybe not in the right order or at the right time.
“It's true some economic indicators have improved, but an increasing GDP is not so useful if it doesn't translate into more jobs and a smaller deficit.”
The numbers I have seen indicate that the unemployment rate is trending downwards and the deficit looked to be leveling out from its previous downward trend but then it suddenly crashed. I don't know why.
Reekie,
“Looking at the thread above, I was pleased to see rather what looks like a brainstorming and dialogue rather than confrontation.”
Thank you. I note that this appeared to be initiated by me presenting some fact-based opinion rather than the cherry-picking of selective data to fit with an opinion.
“Macri's economic and financial decisions have brought the country to the edge in a very short time by de-financing the state, exacerbating the country's endemic fiscal disbalance, and paying for the party with the credit card.”
I think he borrowed to invest in the infrastructure which had been neglected for many years and made changes aimed at helping businesses. He was successful in that unemployment is trending downwards and productivity is increasing but will it be enough to start paying off those debts? It was a gamble and maybe a truly gradual approach may have been better in hindsight?
@ZB
Jul 09th, 2018 - 10:20 pm - Link - Report abuse 0Perhaps you have agreed with me before, but not so much since I began to think Enrique was right (at least on some things).
Unfortunately the latest news on economic indicators is not good:
http://en.mercopress.com/2018/07/09/argentina-on-the-rocky-road-to-recession-anticipates-the-economist
The infrastructure projects have had to be postponed to reduce the deficit (on the orders of the IMF). The last news I remember on unemployment was that the official rate had fallen, but only because some people had given up looking for jobs. Have things changed since then?
Some people think a less gradual approach would have been better but I kind if doubt it. It didn't go so well when it was tried before. Probably he should have increased the energy bills but left the tariffs for now, that would have helped with the deficit and avoided the double whammy for businesses.
The thing I don't understand is why inflation remained so high. Reducing the import tariffs would be bad for certain businesses but should have made food etc cheaper. Why didn't it?
Commenting for this story is now closed.
If you have a Facebook account, become a fan and comment on our Facebook Page!