By Nikole Ottolia
November 24, 2019
Over the past month, South America has experienced what is being called “the Latin Spring.” Violent protests in Chile, a confusing coup d’état in Bolivia, political unrest in Colombia and the ongoing crisis in Venezuela, have caused anxiety for leaders throughout the region. It was in front of this backdrop that Argentines went to the national polls on October 27.
Alberto Ángel Fernández was confirmed Argentina’s new leader, capturing 48.1% of the vote and unseating incumbent President Mauricio Macri. Despite the loss, the day after the election, Macri invited Fernandez to breakfast to discuss an “orderly political transition.”
It appears that Argentina will enjoy such a transition. Considering it has only been 36 years since the nation returned to democracy after seven years under a military junta that killed, kidnapped and disappeared tens of thousands of its citizens, the institution of democracy in Argentina seems as strong as ever. Yet, the 2019 election result reflects a record degree of polarization between the incoming left-wing Peronist Party and Macri’s right-leaning Propuesta Republicana (PRO).
SAIS 2019 graduate, and Country Risk Analyst at J.P. Morgan, Maria Belen Wu, was born and raised in Buenos Aires. She sat down with the SAIS Observer to shed light on what exactly Peronism is and how it impacts the political, social and economic landscape of Argentina. “Peronism in its inception was a populist movement (created by President Juan Domingo Perón during the 1940s). It did not conform to any specific ideals but, rather, was a movement ‘for the people.’ Over the decades Peronism has taken many forms, morphing from a labor movement to free-market conservatism and back to ultra-leftist militancy, which eventually branched off as Kirchnerism.”
Kirchnerism is a branch of Peronism created under Néstor Kirchner, Argentina’s President from 2003-2007. Although Kirchner died of cardiac arrest in 2010, he was survived both in life and in the Casa Rosada (the Argentine White House) by his wife Cristina Fernández de Kirchner, or CFK. (CFK is not related to new President Alberto Ángel Fernández, although in the recent election they were running mates under the ticket Fernández-Fernández).
As president, CFK continued the anti-neoliberal policies of her husband’s administration and pursued a protectionist economic policy which disallowed the importation of goods already produced in Argentina to protect local industry and employment. Kirchnerism strongly opposes multilateral and bilateral free trade agreements with the United States, preferring to strengthen relations with other Latin American countries, Iran and China. By the end of her presidency, it was clear that CFK’s free-spending policies and protectionism had left Argentina isolated and indebted. CFK, for her part, faced multiple corruption charges.
In 2015, Mauricio Macri won the presidency in a second-round ballotage. Although not a Peronist, Macri won on a platform pledging to strengthen institutions, introduce pro-business policies, cut deals with foreign creditors, realign Argentina’s foreign policy away from Venezuela and closer to the US, and, above all, boost the country’s economy. Unfortunately, Macri’s economic agenda flagged under his gradualist approach. His reluctance to cut welfare in the face of political pressure further increased the country’s debt. Even a $57 billion bailout package from the IMF was not enough to save Macri’s economic reforms, and, in the end, Macri’s government reinforced Argentinians’ negative impressions of “neoliberal” economic policies. As a result, the Argentine political pendulum has once again swung left.
For markets, this spells disaster. As Belen Wu shared, “Lack of policy continuity is always a source of volatility, and, in the case of Argentina, this effect is amplified by the poor track record of fiscal imprudence and protectionist policies associated with the Argentine left, as well as the high frequency of financial crises and sovereign defaults – Argentina is headed toward its ninth default in history and third since the turn of the century. In its current state of illiquidity (and some would say outright insolvency), an incoming leftist administration promising social spending increases and exhibiting a combative attitude towards the IMF is the last nail in the coffin of Argentine debt sustainability.”
Argentina has long confounded economists the world over. As such, SAIS students will surely hear the country mentioned in their International Monetary Theory classes. The fact remains, though, that the average Argentine cares far more about putting food on the table than about how international markets gauge their levels of solvency. Political candidates who successfully communicate that they are “for the people” often win in Argentina.
Those candidates are almost always Peronists.