The important implications of Macri’s victory in Argentina’s legislative elections

AEIdeasBy Roger F. Noriega & Andrés Martínez-Fernández

10/25/2017

On Sunday, Argentina’s governing, center-right coalition won a decisive victory in the country’s pivotal legislative elections, considered to be a referendum on President Mauricio Macri’s agenda for free market reform. Macri’s Cambiemos coalition outperformed expectations by winning the five most populous Argentine provinces, and a total of 13 of the country’s 23 provinces. Cambiemos increased its presence in the Senate from 17 to 26 seats and gained 20 new seats in Argentina’s lower house. Voters clearly displayed their support for Macri’s dramatic departure from his predecessor’s populism and destructive protectionist policies.

The results will boost President Macri’s agenda to restore Argentine competitiveness and embrace trade and investment, expanding Macri’s mandate to take on the difficult obstacles to growth that remain. Investors recognize the importance of Macri’s reforms and the significance of Sunday’s victory, which was immediately followed by a jump in Argentina’s Merval Index to record highs.

Since taking office in December of 2015, Macri has employed a gradualist approach, often opting for incremental reform on some of the more disruptive yet necessary economic reforms. He has made significant progress on eliminating trade barriers, government subsidies, and foreign exchange controls but Macri has also postponed tax cuts, labor reform, and significant cuts to Argentina’s bloated public sector.

Macri has faced challenges to his agenda including heavy protests for taking difficult steps in reforming the economy such as cutting costly energy subsidies. Sunday’s victory has reinvigorated Macri’s mandate, but he still needs to balance reforms while contending with public opinion and issues like unemployment in a country not known for its tolerance for austerity measures. He also has to deal with a vocal, albeit weakened, opposition and a congress which his coalition does not control. Nonetheless, the victory for Cambiemos is significant and it reinforces a positive shift in Argentine politics.

The continued success of Macri in Argentina also has larger implications for the region. Too often, Latin American leaders advocating free trade, business, and investment have fallen to the corruption and cronyism that creates barriers to inclusive growth. Macri is poised to restore the region’s confidence in free market ideals and validate an alternative to the populism that scapegoats international business and trade in order to cover up statist failures. …

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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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