THE pot-bangers are back. On
November 13th several thousand gathered outside the Casa Rosada to protest
against corruption, runaway inflation, crime and above all the government of
Cristina Fernández de Kirchner. Judging by their chants, “Argentina sin
Cristina” (Argentina without Cristina) was their principal demand. Her
approval-rating languishes at 30%. But the crowd was nowhere near as large as
the million who rallied in 2013
Argentina’s economy is suffering
from a combination of a global slowdown and a series of self-inflicted wounds,
including the imposition of exchange controls, which worsened a crisis of
confidence in the peso, and a debt default in July, which intensified the
recession.
Official numbers say that the
unemployment rate climbed from 6.8% in the third quarter of 2013 to 7.5% a year
later. But it is really 1.5-2 percentage points higher, private-sector
economists believe. Even for Argentines with jobs, living standards are
dropping. The country’s inflation rate has soared from 28% in 2013 to an
annualised 41% so far this year.
Car sales have plunged by 35% from
last year. Even more worrying is the slide in spending at supermarkets, which
dropped by 4.3% year-on-year from September 2013, according to EconViews, a
consultancy.
The government’s counter-measures
are making matters worse. It has expanded state employment by nearly 5% this
year to blunt the rise in joblessness. But the deficits needed to pay for this
are being financed by printing pesos, which worsens inflation. Import
restrictions to control the trade deficit are causing shortages of both
consumer goods and the supplies that manufacturers need to maintain production.
Unexpectedly, the “blue dollar” premium—the gap between the official rate for
the United States dollar and the parallel free-market rate—dropped from 90% in
September to 70% now.
The threat of social turmoil
remains, too. December is a nervous month. It is when Argentines hoping to
treat their families to holiday gifts and meals feel most stretched and summer
heatwaves trigger power cuts. For the past two Decembers, police officers in
various provinces have gone on strike for higher pay. Last year more than a
dozen people were killed in looting during the police walkout.
The next big test will come in
January, when the government must decide whether to resume talks with creditors
who hold bonds on which Argentina has defaulted. There is an
opening, provided by the expiry on December 31st of the “Rights
Upon Future Offers” clause of the bond contracts, which bars the government from
offering one group of bondholders a better deal than the terms others received
during earlier debt restructurings. Argentina defaulted rather than make an
improved offer that had to be open to all bondholders. A deal with creditors
could bring relief, however, by giving the country access to dollars, which
would in turn allow it to ease controls on imports and on capital
The next presidential election, to
be held in October 2015, will bring about a bigger change, with luck for the
better. All three leading candidates say they would break with the populism and
protectionism that have prevailed during the presidency of Ms Fernández and
that of her husband, Néstor Kirchner, who governed from 2003 to 2007 and died
in 2010.
The candidate closest to Ms
Fernández is Daniel Scioli, the governor of Buenos Aires province, who belongs
to her Peronist Front for Victory (FPV). But he is no clone. He is more
pragmatic than the president. He would maintain the popular social programmes
she introduced and would not reverse the nationalisation of YPF, the biggest
energy company. But he says he would do a better job of fighting crime and
inflation.
He
faces a charismatic rival in Sergio Massa, a congressman who broke away from
the FPV last year, more to distance himself from Ms Fernández than because of
any profound disagreement with her. He is a gifted speaker and an astute
political operator. So far his candidacy has revolved more around his
personality than his ideas.
The biggest and perhaps most
encouraging change would come from Mauricio Macri, the popular mayor of the
city of Buenos Aires and the only non-Peronist in the race. Republican Proposal,
the centre-right party he founded, is pro-market and favours greater openness
to global and regional trading partners.
There is no clear front-runner in
the early opinion polls. Much will depend on how the economy fares between now
and next October. Relief from inflation and unemployment would help Mr Scioli.
Further misery would play into the hands of his rivals—and bring out the
pot-bangers.
