Argentina’s Macri Faces an Ugly Economic Dilemma

bloomberg viewWhen President Mauricio Macri took office in Argentina last December, he faced two monsters that his 44 million compatriots know only too well. The first was an economy ravaged by spendthrifts, who’d driven public finances into disarray and then papered over the mess with magical statistics. The second was the quandary of how to restore sensible government without inflicting more sacrifice on an already castigated society, whose woes Macri’s populist opponents predicted and are masters at exploiting.

Argentina is hardly alone in this dilemma. As last decade’s commodities boom collapsed, leaders who squandered the bonanza fell out of favor across Latin America. Now the centrist new managements in Brazil, Peru and Paraguay — and one day perhaps in Bolivia, Ecuador and Venezuela — must convince the populace that their cant of austerity is better than the cant of the extravagant populists they oppose. “Through history we have seen the political pendulum swing from populism to technocratic engagement, which often ends up generating frustration and more populism,” said Argentine historian Federico Finchelstein, of the New School for Social Research in New York. “Now we are in the technocratic moment.”

Macri knows the stakes. That’s why he campaigned on the promise not just to rescue Argentina’s economy but also to halt the country’s plunge into social misery. On the first count, he’s done admirably, sharply devaluing the bloated peso, slimming the bureaucracy and cutting lavish subsidies for electricity and transportation. He also reached out to holdout creditors, ending the country’s decade-and-a-half cold war with the global financial markets. The country has since returned to the bond market, construction is showing signs of recovery, and even Argentina’s cranky opposition briefly fell quiet. “I see so much joy,” he told corporate leaders at a grand investor summit Argentina hosted last month. …

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During the last several decades, the United States has invested billions of dollars in trying to help the governments of Latin America and the Caribbean deliver better lives for their citizens. This has meant helping them increase internal security by combating the illicit growing and trafficking in narcotics and the activities of terrorist groups, as well as helping them to shore up their democratic and free market institutions.

Unfortunately, in recent years, continued progress in these areas has been threatened, not least by the elections of radical populist governments in Venezuela, Bolivia, and Ecuador. These governments have instituted retrograde agendas that include the propagation of class warfare, state domination of the economy, assaults on private property, anti-Americanism, support for such international pariahs as Iran, and lackluster support for regional counter-terrorism and counter-narcotics initiatives.

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