The Economist UK - 07.09.2019

(Grace) #1
The EconomistSeptember 7th 2019 63

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A

rgentina wasnot invited to the Bret-
ton Woods conference in 1944 that
created the imf, and it did not join until



  1. But it has been making its presence
    felt ever since. At the end of August a team
    from the imf visited Buenos Aires to assess
    the lie of the land before deciding whether
    to give Argentina’s government, led by
    Mauricio Macri, any more of the record
    $57bn loan (worth over 10% of Argentina’s
    2018 gdp) agreed last year. But as the team
    left town, the landscape shifted.
    Mr Macri’s government said it would
    delay $7bn-worth of repayments on short-
    term bills held by institutional investors
    and seek a rescheduling of over $50bn of
    longer-term debt. It would also request
    new, extended loans from the imf to help
    Argentina repay the money it already owes
    them. As the markets digested the news,
    the ground moved again. On September 1st
    the government imposed currency con-
    trols, preventing Argentines from buying
    more than $10,000 a month, forcing ex-
    porters to convert their earnings into pe-


sos, and placing new restrictions on com-
panies’ ability to buy foreign exchange.
“This is not a port we imagined we
would reach,” said Hernán Lacunza, Mr
Macri’s new finance minister. The presi-
dent had, after all, cast off in precisely the
opposite direction after coming to power

in December 2015, seeking to remove many
of the clumsy impediments to market
forces imposed by his predecessor, Cris-
tina Fernández de Kirchner. Abolishing her
currency controls and unifying Argentina’s
exchange rate was one of his earliest,
proudest successes. Now Argentina once
again has a black market for dollars, just as
it did under Ms Fernández.
The reason for this dramatic reversal of
policy is an equally dramatic reversal of po-
litical fortunes. On August 11th Argentina
held “primary” elections (which are con-
tested by all parties and in which voting is
universal and compulsory). Mr Macri lost
decisively to an opposition ticket featuring
Alberto Fernández, a veteran Peronist, as
president and Ms Fernández as vice-presi-
dent (the two are unrelated). The news that
their victory in next month’s presidential
election was now almost certain alarmed
Argentina’s creditors, who feared they
would fail to honour the country’s debts,
and corral capital flows. The peso fell by
25%, the principal stockmarket index col-
lapsed and the cost of insuring against de-
fault tripled. Neither sky-high interest
rates nor the central bank’s sales of dollar
reserves could arrest the currency’s fall.
Since the government could not persuade
foreigners to hold more pesos, it has been
forced to stop Argentines buying too many
dollars instead.
Even if Mr Fernández wins outright in
October (avoiding a run-off election), he

Argentina’s economy


Force of circumstance


BUENOS AIRES
In its death throes, Mauricio Macri’s government emulates its opponents


Dying fall

Source: Datastream from Refinitiv

Argentine peso per $
Inverted scale

2018 2019

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Finance & economics


64 Buttonwood: Tales of the expected
65 China’s bank bail-outs
66 Consider the lobster roll
66 Part-time work: a balancing act
68 Free exchange: Remembering Martin
Weitzman

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